State minimum wage debate revived

Economists were at odds over the minimum-wage proposal, which voters favored by a 3-to-1 margin. Some argued the change would lead to fewer jobs and higher prices for consumers, while others said increased wages would improve earners’ living standards and purchasing power.

Missouri’s minimum wage is now tied to the consumer price – or cost of living – index, which is calculated each year by the U.S. Department of Labor to measure inflation. The state minimum wage was initially raised to $6.50 an hour in 2007, and this year, the pay rate increased to $6.65 an hour.

Starting Jan. 1, Missouri employers will be required to pay a minimum wage of $7.05 an hour or $3.53 an hour for employees who receive tips. A nearly 12-point CPI increase between July 2007 and July 2008 drove the 40-cent increase.

Then, on July 24, 2009, the U.S. Department of Labor will raise the federal minimum wage for the third time in three years to $7.25 an hour, which will supersede Missouri’s new minimum wage.

“The law says that Missouri employers cannot pay lower than the federal rate – ever,” said Wanda Seeney, a spokeswoman for the Missouri Department of Labor and Industrial Relations.

DOLIR released the projected 2009 state minimum wage more than a month prior to the Sept. 30 finalization date as a courtesy to companies bracing for the non-negotiable pay hike. Many of those companies already had inquired about next year’s wage, Seeney said.

“Some of them were calling because they were trying to plan ahead,” she said. “I think what we’re seeing, in general, is that employers are passing off those extra costs to the consumer. I think they’re doing whatever they can to stay afloat.”

As affected employers rejigger their payroll for the coming year, few opinions seem to have changed about Missouri’s new minimum-wage structure.

Rift remains

Businesses that employ low-wage workers knew the increase was coming, but that hasn’t made it any easier to digest for many of them, especially amid an economic downturn.

Gary Leonard, who owns six Steak ‘n Shake restaurants in Springfield and employs about 320 people, said current market conditions allow him to hire entry-level employees at a wage slightly higher than Missouri’s minimum wage.

“What may happen – as the economy continues to struggle – it may be untenable for some people to hire people in at that wage rate,” he said. “That’s why I say the market should set it.”

That also applies to the minimum wage for restaurant servers, Leonard said, noting that tipped employees in Missouri received a $1.12 hourly increase in 2007. With servers accounting for 40 percent of a restaurant’s labor costs, operators may decide to hire fewer servers, he added.

Pointing to recent speculation about the possibility of an economic depression, Leonard noted that Missouri’s minimum-wage structure could flatline or drop below the federal minimum wage, which now stands at $6.55 an hour. If that were to happen, Missouri employers would be required to adhere to the federal minimum wage.

Groups that squared off on both sides of the minimum-wage issue two years ago haven’t backed down from their original positions.

Brad Stokes, president of the Springfield Labor Council of the Missouri AFL-CIO, said wageworkers struggling to get by now have a built-in mechanism to keep pace with the rising cost of goods and services. The 6.1 percent cost-of-living increase from 2007 to 2008 doesn’t exclude minimum-wage workers, he added.

“When you put another quarter, another dollar, in the pocket of people that aren’t making much money, they turn around and spend every penny of that,” Stokes said.

The Missouri Chamber of Commerce and Industry has strongly opposed a state minimum wage tied to inflation, which Executive Director Dan Mehan likened to a government-mandated pay raise that accounts for inflation but ignores other market conditions.

“It’s not good medicine right now, to be blunt about it,” Mehan said. “The market doesn’t follow the state wage. … Our position is take it back to the federal level and leave it alone.”

Here to stay?

Most Missouri employers don’t pay minimum wage, so attempts to galvanize them against the 2006 ballot initiative wasn’t easy, Mehan said.

According to an analysis by Washington, D.C.-based nonpartisan think tank Economic Policy Institute, about 10 percent of Missouri’s work force in 2006, or about 256,000 employees, stood to gain from the minimum-wage increase. EPI analysts also cited job growth in states with a minimum wage that was higher than its federal counterpart to counter assertions that raising Missouri’s minimum wage would lead to job losses.

Missouri’s unemployment rate in July was 6.4 percent, but it’s unclear whether the state’s steadily rising minimum wage has played a significant role.

“The opponents claim the same thing: that increasing the wage leads to job losses,” union representative Stokes said. “Certainly we’ve had some job losses throughout the country, but not because of the minimum-wage increase.”

David Mitchell, an associate economics professor at Missouri State University, said that job growth in Missouri’s retail trade and leisure/hospitality sectors are not keeping pace with nationwide rates. Retail trade employment has grown 0.2 percent statewide since 2005 versus 0.8 percent nationwide, while leisure/hospitality employment in Missouri increased 2.8 percent versus 6.7 percent nationwide, said Mitchell, who also is director of the Bureau of Economic Research.

“We’re looking at essentially a credit crunch … and at the exact same time, we’re asking employers to increase the wages for workers when there’s been no increase in productivity for those workers,” he added. “It’s simply an increase in costs.”

Mehan said efforts to legislatively modify Missouri’s minimum-wage structure in the face of a landslide vote would be difficult, and Dan Shaul, state director of the Missouri Grocers Association, agreed.

“I think it’s very hard for (lawmakers) to go against the vote of the people,” Shaul said. “I think it would have to become a little worse before it gets better. And with a very strained economy, I think time will tell this may not be the best thing for the state of Missouri.”

Seeney at DOLIR said she was unaware of any organized efforts to change the way Missouri figures its minimum wage, which appears here to stay.

“I think, in general, employers have caught on relatively quickly with the law and most of them are complying with it,” she said. “There are cases where the employers are adamant about not doing the right thing. … Those would be referred to the Attorney General’s Office for prosecution.”

Seeney also reminded employers that they are required by law to display a new minimum-wage poster come January. The posters can be downloaded at DOLIR’s Web site at www.dolir.mo.gov/ls/minimumwage.

SBJ.net Poll

Missouri will likely raise its minimum wage 40 cents to $7.05 in January. Do you approve? Why or why not?

Vote at sbj.net/poll.