Hike in minimum wage will impact businesses

Monday, July 28, 2008

The most recent minimum wage hike is expcted to cause problems for small businesses, but perhaps not as badly in Putnam County, according to some local business owners.

In a recent release of preliminary data by the Employment Policies Institute (EPI), the relationship between minimum wage increase and unemployment was made.

In the study, the 2005-06 wage increase in New York State was analyzed and found that the employment decline among vulnerable groups like teenagers and adults without a high school degree was substantial.

According to the study, "For every 10-percent increase in minimum wage, employment among 16-29 year olds without a high school degree decreased between six and 14-percent."

Following the trend, a study done at the University of California at Irvine found that for every 10-percent increase, employment for the demographic in question fell by 8.5-percent.

In a press release from the EPI, it is stated that the job loss is a result of the burden government places on small businesses by consistently increasing labor costs with auto-pilot wage hikes regardless of economic conditions.

For a business with 20 entry-level employees, the recent wage hike of $0.70 will increase labor costs by approximately $30,000 in the next year. Businesses with small profit margins would need to sell hundreds of thousands of dollars in additional goods to recoup those increased costs, a virtual impossibility in this stagnant economy.

"Decades of economic research clearly demonstrate that minimum wage hikes result in job loss for the most vulnerable members of the economy," said Rick Berman, executive director of EPI. "The unintended consequences of Thursday's hike is pricing low-skilled working Americans out of the job market and increasing unemployment among those groups that need help the most."

However, around Greencastle most businesses are reporting that this will not be an issue. The smaller companies such as Headley's Hardware and Putnam Inn reported they already pay their employees more than minimum wage. The businesses that pay minimum wage like fast-food restaurants are likely to be able to afford the wage increase due to their corporate status.

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  • What smaller gov now said may be true, to a point. No everyone is capable of making the "big money". There are a lot of special needs people who can only get minimum wage jobs. Also, if everyone had the "big bucks' jobs, who would do the other, less paid jobs? Someone has to do them. What is really sad is how can anyone live on $6.55 an hour, which is what minimum wage pays-(it was $5.85).

    Raising the minimum wage is NOT a political ploy!!! It is so people will have more of a fighting change to get ahead. But, stop and think how many hours someone has to work to even fill their gas tank to get to work, let alone buy food for the table or put a roof over their head and clothes on their back. Give these people a break!

    -- Posted by interested party on Tue, Jul 29, 2008, at 5:18 PM
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