The thought of raising the federal minimum wage to $10.10 leaves some local small business employers filled with apprehension.
Marco’s Pizza franchisee Woody Johnson operates three pizza chain stores across metro Augusta. Johnson and his business partner will add three more locations in the area by next summer, doubling the payroll to about 180 people, many of whom are part-timers paid the current minimum wage of $7.25 an hour.
“Eventually, it’s going to get where we can’t grow more stores and we’ll have a difficulty just growing the stores we’ve got with employees,” he said. There have been three minimum wage increases in the past seven years. “So at some point for us, it’s going to kill growth, kill jobs,” he said.
And the nearly $3 per hour increase in wages would affect more than those making the minimum. At Green Thumb West Nursery and Garden Center in Martinez, the starting wage for David Bokesch’s team of 11 workers is $8.50 per hour.
Bokesch acquiesced that $7.25 is not enough to support a family, but wondered if raising it to $10.10 would make much of a difference.
“It’s a tough question,” he said. “I think it’s fine for politicians, especially in election years, to say things, but they’re not down in the trenches with small businesses. They don’t know what it’s like.”
Bokesch said he believes knowledge and performance should dictate an employee’s pay.
Small business bears the brunt whenever legislators raise the minimum wage, said Kyle Jackson, Georgia’s director for the National Federation of Independent Business.
“The minimum wage increase always disproportionately impacts small businesses versus large businesses, because it’s more likely that a small employer is going to pay somebody around the minimum wage,” he said.
The Congressional Budget Office reported in February that total employment could plummet by an estimated 500,000 workers, or 0.3 percent, if the minimum wage was raised to $10.10 by the second half of 2016. The jobs would be lost because businesses would not be able to accommodate the increased wage, so eliminating positions would be the only way to sustain current payrolls costs.
But the CBO analysis also predicted that the minimum wage increase would likely result in 16.5 million low-wage workers earning higher incomes during an average week and could bring about 900,000 people out from below the poverty level.
“To me the minimum wage debate is really more about noise than it is about sound economic policy,” Jackson said. “When we’re just starting to inch and crawl our way out of the economic recession the last thing we want to do is saddle small employers, who are the engine of job recovery, with more and more regulatory and financial burdens.”
The push, led by President Obama, to boost the hourly minimum wage by nearly $3 is not well-received by Chuck Baldwin, who owns French Market Grille in Surrey Center with wife Gail.
“If they increase it, a business like ours has no choice but to pass it on to the customer,” Baldwin said. “All you’re doing is making the product more expensive when people go out to eat. It kind of backfires on people. They have good intentions, but they won’t like the repercussions of it.”
At Baldwin’s restaurant, new employees start at minimum wage but often earn a raise within three months. The average hourly rate for Baldwin’s 45 employees is already above the proposed $10.10 rate, he said.
The minimum wage, he added, was designed to offer short-term, entry-level pay, not provide a sustainable salary. Baldwin said he’d most likely have to scale back his staff size if the proposed increase went into effect.
“I’d be amazed if every restaurant or everyone (in the service industry) didn’t do that same thing,” he said. “Unemployment would go up – let alone the prices at the register, too. It would kind of be a dual negative.”
Georgia Bank & Trust President and CEO Dan Blanton said the backbone of this country’s economy is small business, which continues to struggle.
“What you need to do really is protect these small businesses that are providing these jobs,” he said. “You make it harder and harder for them, and they’ll scale back. They’ll go out of business and then all those jobs are lost.”
Blanton said that although the Augusta-based bank employs minimum wage workers, he doesn’t foresee a situation in which the institution’s operations would be affected by a wage increase.
Earlier this year, Obama signed an executive order that raised the hourly minimum wage to $10.10 for federal contractors. The order will take effect Jan. 1, 2015.
Jackson said he believes a similar wage increase in the private sector will be a harder sell.
“I’m not in Washington and I’m certainly not behind those closed-door meetings, but it would seem that the President faces a pretty uphill climb in the House certainly and maybe even in the Senate,” Jackson said. “Certainly in an election year, you’re going to find most reasonable people to be pretty sensitive to adding new burdens on small employers.”