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For nearly a decade now, there has been considerable debate over raising the minimum wage in this country, whether we should replace it with a "living wage" that takes into consideration many other factors, chiefly the cost of living in different localities, or simply leave it up to businesses and the market place to determine wages. And since 2001, adjustments to the minimum wage have been defeated each time they have been brought before Congress.
However, just recently a program to allow the base rate paid to low-income workers has been accepted and allows the minimum wage to be increased from $5.15 per hour to $5.85 per hour. According to the Labor Department, this increase will affect about 1.7 million people, who will get another 70-cent increase each summer for the next two years. By 2009, the minimum wage in this country will be $7.25 per hour.
But is this good for America?
Most of us remember how when we were kids someone would not only help bag your groceries but would also load them into the car. Although that still may happen at some grocery stores around the country, for the most part that service has long since disappeared. At some stores, they no longer even bag your groceries for you; the checker rings up your purchases, but you must bag them yourself.
This has occurred because minimum wage increases have forced grocery stores to eliminate these entry-level jobs, which often were an excellent way for young people to get some work experience and make a little spending money. "When you have to pay more [in wages], employers begin to find other options to keep costs down," such as eliminating jobs, according to Jill Jenkins, chief economist for the Employment Policies Institute, a Washington, D.C., nonprofit research organization dedicated to studying public policy issues surrounding employment growth.
According to the National Restaurant Association, the last time the minimum wage was increased it cost the industry more than 146,000 jobs. And surveys found that restaurant owners put off plans to hire an additional 106,000 employees due to the wage increase. It is believed with the upcoming minimum wage increases, "menu prices will increase, some positions will be eliminated, and there will be a reduction in staff hours," says Brendan Flanagan, the association's vice president of Federal Relations.
Although the first rate increase is not that significant, many industries are already wondering how they will deal with subsequent increases. Along with eliminating jobs, many will likely pass on their costs in the form of increased charges, which means all of us.
A new twist
Because of the frustration many state and local jurisdictions have had with the federal government's lack of action to keep the minimum wage in pace with inflation, they have enacted their own laws and regulations, often referred to as "Living Wage" legislation. Today, there are more than 100 jurisdictions that have mandated living wages tied to all types of contracts that they award to outside firms.
These living wages, in most cases, are the wages a full-time worker would need to earn to support a family above the federal poverty line, ranging from 100 percent to 130 percent of the poverty measurement.
As a business owner, I am philosophically opposed to all government mandates, especially where they violate the relationship an employer has with his or her employees. And, I think it is causing considerable chaos the way that living wage legislation has sprung up around the country. Now that Congress is moving forward with minimum wage increases, it may become even more confusing determining where the living wage legislation fits in.
Mandating increases
It seems that many government bodies are speaking with a forked tongue when it comes to selecting contractors and paying wages. On the one hand, many are mandated by law to select the low bidder when it comes to choosing a cleaning contractor, but then they tell the contractor the minimum amount he or she must pay the workers. In some cases, they may even direct the contractor to have a certain number of workers to service the locations cleaned. The contractor is hired as the professional and should have input into the process. However, the customer — who in most cases lacks sufficient knowledge and expertise — is calling all the shots.
Few if any questions are asked about how many workers the contractor feels are necessary and whether costs can be reduced by hiring fewer workers and instead using more productive cleaning equipment and systems. And how about the quality of work provided? Selecting the low bidder is one thing, but in so many situations the low bidder simply cannot maintain the facilities satisfactorily and at the same time meet the wage and other labor requirements necessary to manage the contract while achieving a profit.
I guess my big issue with a living wage requirement is that it is forced on business owners without consideration of all the costs and ramifications it can have to business in general, business owners and consumers. It does not reward quality or service but instead often forces employers to cut their labor force, which can hamper quality.
And one other thing not addressed is the fact that usually these wage increases result in a lot of bureaucratic and administrative expenses for businesses. According to a study, in one Maryland county it will cost $30,000 to more than $100,000 annually just to enforce and monitor the living wage legislation — quite a bit of money considering how few people will really benefit from the wage increase.
I wish government would look at the total package and see if there are ways other than mandated wage increases to help low-income workers as well as businesses and consumers. It would be more responsible to award contracts based not on low bid or how much the contractor pays his or her workers but instead on quality, service and value over price.