70 cent raise is first increase in 10 years

By Tammy Joyner
The Atlanta Journal-Constitution, 7/24/07

Connor Adams started his first job less than a month ago and already he's slated for a raise, thanks to Uncle Sam.

"Oh! Really?" the 15-year-old responded when told of the extra money he'll get in his paycheck starting today.

He was hired at $5.50 an hour — above the old hourly minimum wage of $5.15 — to bus tables for the summer at Grant Central Pizza & Pasta Restaurant in Grant Park. Now, he'll get $5.85 an hour, the result of Congress passing an increase this year.

The last time the federal minimum wage got a boost, Sept. 1, 1997, Connor was in a booster seat. Since then, 32 states and the District of Columbia have increased minimum wage at the state level. Georgia is among 18 states that didn't.

While the teenager is psyched about the extra money, he wonders how older full-time minimum wage workers will make it on a 70-cent increase, the first of three incremental increases during the next two years.

Many workers and some employers think the changes are long overdue, while other businesses and some economists think the increases will do more harm than good.

"I don't think that's enough for people to live on, considering prices have gone up for everything else," said Connor, who is saving up to buy an Apple laptop with the money he's earning from his temporary summer job. In fact, everyone at the pizza joint already makes well above minimum wage.

"As a small-business owner, we've always seen our employees as helping us," said Margaret Kaiser, a state legislator who owns two Grant Central restaurants with her husband, Eric, and a business partner, Donnie Parmer.

A bigger issue is health insurance, Kaiser said. "It's been cost-prohibitive for us to provide health insurance. As a legislator, I'd love to see Georgia come up with a pool for small businesses to purchase health insurance for their workers."

Atlanta innkeeper Debi Starnes said her business hasn't suffered from paying workers more than the minimum wage.

"I have owned and managed two businesses for the past 20 years, and I have never paid anyone the minimum wage," said Starnes, owner of Sugar Magnolia Bed & Breakfast. "My businesses have benefited from employees who have been paid more fairly. I cannot imagine, in 2007, looking someone in the eye and paying them just $5.15 an hour."

Top execs sign on

Starnes and Kaiser are among a national group of business owners and corporate heavyweights who came out last week in favor of the federal increase. The coalition, which calls itself Businesses for a Fair Minimum Wage, collected more than 800 signatures, including the chief executives at Costco, ABC Homes and the U.S. Women's Chamber of Commerce.

"Raising the minimum wage is good for business," Costco CEO Jim Sinegal said in a statement.

"You're not going to notice it," contended Jared Bernstein, senior economist at the Economic Policy Institute, a liberal think tank in Washington. "All the hype that it's going to be detrimental to the economy is just that — hype."

Many, however, disagree.

In Georgia, where efforts to pass a higher state minimum wage this year were crushed, about 8 in 10 small-business owners oppose the federal mandate. That's according to a survey by the Georgia chapter of the National Federation of Independent Business, the state's largest group of small-business owners with 10,000 members.

Most of the group's members are small — employing fewer than 25 workers. As a result, many of the business owners polled said they would cut staff and work hours, leave jobs vacant and pass on higher prices to customers to deal with the increase.

"We truly are the mom-and-pop shops," said NFIB Georgia state Director David Raynor.

"Small businesses get hurt the most," said Rob Montz, senior researcher at the Employment Policies Institute, a conservative think tank in Washington. "They have the least financial wiggle room and the slimmest profit margin. So they're the ones who have to cut back on workers or close."

Workers who need it most — the poor with limited skills — may not benefit from the raise, Montz said. When employers are forced to pay higher wages, he said, "A lot of low-skilled workers lose out the most because they're not able to find a job or they lose their job."

Many of the people who'll benefit come from households where they're the second or third breadwinner, he said.

Some see the federal mandate as unnecessary since minimum wage workers account for a small percentage of the nation's work force. They also argue that many employers already pay low-wage workers above minimum wage, a practice that emerged during the economic boom that caused competition for workers.

In fact, most low-wage workers in Georgia earn above minimum wage, somewhere between $6 and $7 an hour. The issue is almost a moot point in metro Atlanta, where it's relatively hard to find people earning $5.15 an hour.

"A large number of low-wage workers won't see any impact until next year," said Cindia Cameron, co-chair of the Georgia Living Wage Coalition.

The second phase of the increase takes effect next July, when minimum wage jumps to $6.55 an hour.

All told, some half a million workers in Georgia — or 13 percent of the state's work force — will benefit from a pay hike by the time it the minimum wage hits $7.25 an hour in 2009, according to analysis done by the Economic Policy Institute.

Less buying power

Even with the overall $2.10 raise, workers will have less buying power than they did 50 years ago. Once the minimum wage hits $7.25 in 2009, its value still won't match the value of minimum wage in 1956, when it was $7.65 in today's dollars.

The increase doesn't cover workers who supplement their paycheck with tips, such as waiters and waitresses. But if their tips don't cover the difference between the new minimum wage and their base pay of $2.13 an hour, employers are still expected to make up the shortfall.

Today's increase is a start, but it doesn't offset the financial struggles many low-wage workers still face, said Cameron of the Living Wage Coalition.

"It's a recognition that public opinion, still way behind, is doing something about the deteriorating status of low-wage workers," she said.

http://www.ajc.com/business/content/business/stories/2007/07/24/minwage…

Copyright 2007 Atlanta Journal Constitution