Published: July 23, 2007 10:48 am         

The two-edged sword

Minimum wage hike good, bad depending on viewpoint

ADA — Some of Oklahoma’s lowest-paid workers will have a little more jingle in their pockets beginning Wednesday when the federal minimum wage increases from $5.15 to $5.85 per hour.

The increase is the first pay jump for some of the neediest Oklahomans in almost a decade.

The minimum wage will increase to $6.55 in 2008 and to $7.25 in 2009.

While some opponents of the jump say it will cause layoffs, several locals who were contacted disagreed.

“I really think it’s a good thing for working-class people,” said Allen Butler, co-owner with wife Cindy of Butler Minit Mart in east Ada. “We have some who work for us who go to college and some who depend on their wages here to get by. Those people will be helped, even though we pay most of our workers above minimum wage now.”

Butler said he didn’t expect to lay off any workers or to reduce hours.

“It’s plain and simple,” he said. “When operating expenses increase, so do the prices for products.”

Dennis Widowski, administrator for Jan Frances Care Center in Ada, also said the increase for the minimum wage was a positive step in the right direction.

“It really doesn’t affect our operation,” he said. “The minimum wage for nursing home employees is mandated at $6.65. Most of our workers earn between $7 and $9 per hour now.”

With the current federal minimum wage at $5.15, 29 other states — including some that border Oklahoma — have already raised their minimum wage rate to one higher than the federal level to adjust for cost of living increases.

There are certain exceptions to minimum wage laws. For information, go online at www.okdol.state.ok.us or www.labor.ok.gov or www.dol.gov. or phone (888) 269-5353.

Better way to help Oklahoma’s working poor?

While it seems increasing the minimum wage would help some Oklahomans, most economists say there is a better way to help those families who need it most.

“Three things occur when the minimum wage is raised,” said Dr. Mickey Hepner, Central State University assistant professor of economics and nephew of Dr. James Glasgow, a longtime Ada surgeon. “One, some workers begin earning higher wages. Two, firms who have employees that are drawing minimum wage will have higher operation costs. And three, firms cut back on employees.”

Minimum wage increase a presidential campaign issue

Nationally, the need for higher wages for Americans at the bottom of the pay scale is drawing attention from prospective presidential candidates on the presidential campaign trail.

Democratic presidential candidate John Edwards is calling on supporters to help start a citizens’ movement to fight poverty across America. Of course, some of Edwards’ opponents are claiming it is just political rhetoric after it was revealed the South Carolina Democrat had recently spent $400 from campaign funds for a haircut.

“It would be a wonderful thing if the president of the United States could solve all these problems alone,” Edwards told the Associated Press recently. “It is not the truth. It is a fantasy. If we want to bring about bold change that can end poverty in this country, we need a movement.”

Edwards called for an increase in the federal minimum wage to $9.50 an hour. He said it can be done by increasing financial incentives to businesses locating in impoverished communities.

But Democratic presidential candidate Barack Obama on Wednesday pushed his claim as the anti-poverty candidate and reminded voters of his experience working with the inner-city poor.

Edwards bemoaned the plight of the downtrodden in rural Appalachia.

The rivals hit on strikingly familiar themes in competing speeches on an issue that usually does not get much attention in modern presidential politics. Democrats, however, have pushed it to the forefront.

State debate is nothing new

State Sen. Debbie Leftwich, D-Oklahoma City, was the chair of the Senate Business and Labor Committee that approved SJR 49 in 2006 that would have raised the minimum wage by 50 cents a year for five years through 2011. That measure was not approved.

More than 40,000 Oklahomans are earning minimum wage, according to U.S. Labor statistics.

Hepner said when the minimum wage is increased by 10 percent, there will be a 3 to 6 percent drop in jobs or workers will be offered fewer hours.

“A rise in the minimum wage doesn’t help the working poor, those on public assistance,” Hepner said. “Of those who are drawing minimum wage, only about 15 percent are living in poverty, according to the Congressional budget. Fifty-seven percent of the benefit goes to people making twice the poverty level. Most are teenagers and others who live at home.”

Hepner said most economists believe there’s a better way to help low-income families.

“Most economists believe raising the minimum wage is a pretty ineffective way of fighting poverty,” Hepner said. “Most of us think making adjustments in the earned income tax credit would be far more beneficial. That way, about 98 percent of low-income families would benefit.”

Hepner said for every dollar increase for low income, about 30 cents would be deducted from food stamps and another 30 cents for housing assistance. Thery’re also higher state and federal income, taxes and higher social security deductions.

Proponents claim a hike in the minimum wage is needed because it’s taking more to make a living. Through the first six months of 2007, prices at the wholesale level have been rising at an annual rate of 6.4 percent, a sharp acceleration from a flat reading for the final six months of 2006, according to the U.S. Labor Department’s Producer Price Index.

Labor officials said rising energy and food costs were at the heart of the jump.

How did we get here from there?

The federal minimum wage was established in 1938 with enactment of the Fair Labor Standards Act. The law, officials said, was intended to protect workers from exploitation and to establish a basic standard of reasonable compensation.

“Analysis from the Washington, D.C.-based Economic Policy Institute shows that inflation has eroded the value of the minimum wage until it is now worth 33 percent of the average hourly wage of American workers, the lowest level since 1949,” Leftwich said in 2006. “If the federal minimum wage had maintained its 1968 peak value, the current minimum wage would be $8.69 an hour, according to a study by the Institute on Assets and Social Policy at Brandeis University in Massachusetts.

“Many Oklahomans are working two jobs and still can’t make ends meet,” Leftwich said. “These hard-working men and women and their families deserve a living wage. I also think we need to consider tax credits for our small businesses. I think this is something that is extremely important to our business community.”

Minimum wage increase is not supported by all

The National Restaurant Association, one of the nation’s largest private-sector employers with 12.8 million workers and 935,000 restaurant-and-foodservice locations, expressed disappointment that Congress tied the federal minimum wage increase and tax package to the controversial Iraq spending bill.

“The minimum wage/tax package is entirely out of place in the debate concerning funding the war in Iraq,” said Peter Kilgore, Association acting interim president and chief executive officer, in a press release. “A minimum wage increase will cost our industry jobs, and the vital discussion of how to minimize this job loss is getting lost in the debate. We’re disappointed that the current $4.9 billion tax package does not include more targeted tax relief for those employers most impacted, including restaurants.

“Restaurants are found in every city across the country and serve as the cornerstone of our economy. ... Nearly half of all adults have worked in the restaurant industry at some point during their lives, and 32 percent of adults got their first job experience in a restaurant. For many, restaurant jobs lead to management and ownership opportunities: 8 out of 10 salaried employees have started as hourly employees. The impact of the proposed minimum wage increase is expected to be significant ...

“After the last federal wage hike in 1996, Association research revealed that the restaurant industry lost more than 146,000 jobs and operators postponed plans to hire an additional 106,000 employees. resources to offset the consequences of an increase in the minimum wage.”

     

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