July's minimum wage hike has only upside for workers and businesses

By Kerry Curry, Dallas Business Journal Managing Editor
Dallas Business Journal, 8/9/07
Also published in Austin Business Journal, 8/10/07

The federal minimum wage hike on July 24 barely registered for many workers and employers.

The paltry raise was long past due, and everyone from liberals to conservatives, from large employers to fledgling entrepreneurs, realized that.

Perhaps that's why the usual outcry from business, especially the restaurant and retail industries, was muted at best. The sky, it turns out, is not falling because the minimum wage went up by 70 cents. Nor will it fall when the wage goes to $6.55 next July and to $7.25 in July 2009.

The real shame in the recent minimum wage hike is that it only went up by 70 cents. Many states - more than 30 - already had enacted minimum wages above the federal level because of lack of action by Congress. (Texas has not.) Most of those are in the $6 to $7 range.

Businesses and business groups - at least some - realize that higher wages benefit them in a number of ways: They increase consumer spending, draw better job candidates and reduce turnover. Paying a fair wage also helps in terms of improving and maintaining a company's reputation with its customers and suppliers. And it produces more loyal employees who won't feel like they are being taken advantage of.

"We expect an increased minimum wage to provide a boost to local economies," according to a statement by Business for a Fair Minimum Wage, a group supporting the recent increase. "Businesses and communities will benefit as low-wage workers spend their much-needed pay raises at businesses in the neighborhoods where they live and work."

Business leaders that signed the group's statement ranged from Jim Sinegal, CEO of big-box retailer Costco to Margot Dorfman, CEO of the US. Women's Chamber of Commerce. Locally, Don Williams, the former Trammell Crow chairman who now leads the Foundation for Community Empowerment, was among the signers.

Obviously, not all businesses or trade groups favored the increase. The powerful National Federation of Independent Business, a Washington, D.C.- based small-business lobby with more than 600,000 members, says the minimum wage increase will force employers to raise prices or cut jobs.

Economic Boost

Interestingly, a report by the nonpartisan Fiscal Policy Institute, updated in March 2006, found that states that had a minimum wage higher than the federal floor had faster small business and retail job growth - contrary to the critics of minimum-wage hikes.

And, I discovered an interesting fact about a recent Bizjournals study of 75 metro areas that were ranked for small business prosperity.

The top 10 cities on the list all had a mandatory minimum wage higher than the federal minimum, ranging from $6.15 (Raleigh, N.C., and Minneapolis) to $7.93 in Washington [state]. (Dallas-Fort Worth was way down in the pack, No. 52, and only one Texas city, Austin, broke into the top 20 - at No. 20.)

Coincidence? Perhaps, but certainly an interesting one at that.

In the Dallas area, the boost from $5.15 to $5.85 will affect an estimated 5.6% of the hourly work force in Dallas-Fort Worth or about 91,000 people out of about 1.63 million hourly workers, according to the Federal Reserve Bank of Dallas. The figure doesn't include the self-employed.

Nationwide, an estimated 13 million people - 10% of the work force - will be affected by the minimum wage rising to $7.25 by 2009, according to the Economic Policy Institute, a nonprofit, nonpartisan think tank.

In Texas, the average hourly wage in the state is $17.49, according to June data from the Texas Workforce Commission. Entry level workers in Texas can expect to earn $7.55 per hour, and more experienced hourly workers can expect $22.46 an hour.

Even day laborers - marginalized people in our society such as illegal immigrants, felons and the homeless - are commanding $10 per hour.

Part of a growing debate in our nation is whether we should be paying a "living wage," to those on the lowest rungs of the payscale. The current minimum wage doesn't do that.

As the presidential election heats up, hopefully we'll hear more from the candidates on that topic. It's a conversation worth having.

Can you, as a businessperson, look someone in the eye in 2007 and feel good about paying them $5.85 an hour? I hope not.

CURRY is managing editor of the Dallas Business Journal.
kcurry@bizjournals.com, 214-706-7124

Copyright 2007 American City Business Journals Inc.