In these tough times when businesses are handing out layoff notices in increasing numbers, many firms this week will hand out something you may not expect: A raise.
The federal minimum wage will increase to $7.25 per hour on Friday, and the mandated increase is being met with more mixed emotions than normal from business leaders.
“In a way yes, and in a way no,” said Randy Disoso, general manager of Lawrence’s America’s Best Value Inn, when asked whether he wished he could delay the increase that will require him to pay many on his housekeeping staff more. “Yes, because business is tough right now. But no because the more people make, hopefully, the more they will spend. We need that. We need more consumer spending.”
The minimum wage will increase from $6.55 per hour currently, and is up from $5.15 per hour in 2007. The U.S. Bureau of Labor Statistics estimates that there are at least 31,000 Kansans at or below the current minimum wage who will receive a raise come Friday, and likely several thousand more who are above $6.55 per hour but below the new $7.25 per hour minimum. That number, though, isn’t known by the bureau.
An estimate for Lawrence also is not available. But perhaps one of the larger groups handing out raises next week will be city taxpayers. The city of Lawrence has 231 part-time employees — all in the city’s Parks and Recreation Department — who will receive increases.
“In 2010, we’re anticipating that it will be somewhere around $25,000 to cover the increased wages,” said Ernie Shaw, the city’s interim director of parks and recreation.
The majority of the city raises amount to 25 cents an hour, or an increase of 3.5 percent, but about 60 employees will receive a 70-cent per hour increase, which equates to a more than 10 percent raise.
The raises come at a time when the city is budgeting just a 1 percent wage increase for general employees, and firefighters and police officers are at an impasse in labor negotiations because of compensation issues.
Kansas University senior Brandon Volz knows the increase may come at a tough time for the bosses who have to write the larger checks, but it comes at a good time for him. He’s one of 131 city lifeguards who will be receiving a 25-cent per hour increase.
“As a college student trying to work full time, it should help out quite a lot,” said Volz. “It is definitely a help to college students because fees and charges for school keep going up.”
Whether the increase will help all young workers, though, is an open question, said George Bittlingmayer, a professor at KU’s School of Business.
At $7.25 per hour, younger workers may have more competition from older workers for traditional entry-level jobs. Employers, forced to pay a higher rate, also may have higher expectations of employees.
“People who are a little younger or people who might have a little bit of a troubled work history might have a harder time getting employed because they can’t say ‘give me a chance, I’ll work for $5 an hour,’” Bittlingmayer said.
Bittlingmayer also said there may be some unintended consequences from the increase, especially when businesses are already struggling.
“I had one graduate student who used to own a restaurant,” Bittlingmayer said. “He told the class about how when he had to increase the minimum wage he went from supplying uniforms to dishwashers to making them supply their own. There are other margins businesses can adjust.”
Disoso said he wasn’t sure what adjustments his hotel business would make. But he said it would be hard for many businesses simply to pass the cost along to consumers.
“It is very tough to raise prices,” Disoso said. “Everybody is real price-sensitive.”
Advocates for the wage increase said they don’t doubt that it will create some stress for some businesses. But they also said the increase still was a move in the right direction.
“What’s clear is that the recession gets worse when people have less money to spend,” said David Burress, a retired KU economics professor and a past advocate of a living wage ordinance in Lawrence. “From the point of view of helping the general economy, increasing the minimum wage is a good thing.”