Mo. minimum wage set to increase 10 cents Jan. 1

Wednesday, December 26, 2012

Missouri will raise its minimum wage by 10 cents to $7.35 beginning Jan. 1, but whether local workers will see a change in their pay will depend on the type and size of their employer.

According to the Missouri Department of Labor and Industrial Relations, retail or service businesses with annual gross sales of less than $500,000 are exempt from the increase, though they are subject to the federal minimum of $7.25.

Less than one-third of Cape Girardeau County businesses will have to increase wages, estimated Bruce Domazlicky, director of the Center for Economic and Business Research at Southeast Missouri State University.

According to the 2010 Census Bureau County Business Patterns report, 2,797 establishments in Cape Girardeau County had employees, Domazlicky said. This did not include businesses for which the owner is the only employee.

"So 2,070 businesses had fewer than 10 employees," Domazlicky said. "And I suspect many of them will likely have gross sales below $500,000 and not be affected by the state minimum-wage law."

Employers subject to the change may be forced to adjust prices and make hiring considerations to absorb the cost, he said.

John Mehner, president and CEO of the Cape Girardeau Area Chamber of Commerce, said most local businesses will not have to make any adjustments, not because of size, but because they already pay more than the minimum.

"I don't believe the 10 cent increase will have a major effect on most area employers. It may negatively affect a few, but not many pay minimum wage," Mehner said.

Mehner and Domazlicky said overall effects on employees who earn the minimum will be slight because the increase in income -- $4.00 per week for a 40 hour week -- is so small.

Greater effects will be seen statewide, according to a study by the Economic Policy Institute, a Washington, D.C., not-for-profit whose goal is to assess the conditions and policies that affect lower- and middle-income workers.

EPI's analysis estimates 72,000 workers will be directly affected and 7,000 will be indirectly affected, for a total economic impact of just more than $8.6 million and the creation of the equivalent of 70 full-time jobs.

Domazlicky said the state may benefit but there could be some drawbacks, too.

"What they are saying is that because workers have a little more income, they spend it, which helps to generate additional jobs," he said. "This is true, but we must be careful not to neglect the cost side, which can lead to fewer jobs since it raises employers' costs to hire workers. So, overall, I think any employment impact is going to be pretty small, mainly because the numbers involved [10 cents an hour] are not very large."

A full-time worker making $7.25 per hour makes $15,080 per year; the raise will bring the yearly total to $15,288. The federal government sets the poverty guideline for a single person at $11,170 and at $15,130 for a family of two.

Voters passed a ballot measure in 2006 that requires the state to evaluate the cost of living each year and adjust the wage accordingly. January's increase will be the first since 2009. Neither federal nor state rates were raised in 2010, 2011 or 2012.

An effort to raise Missouri's minimum wage to $8.25 nearly reached the November ballot this year, but the petition was rejected by the secretary of state's office as having too few valid signatures of registered voters.

Nine other states link minimum wage to inflation and are slated to make increases in 2013 ranging from 15 to 35 cents per hour. Washington will raise its rate to the highest in the country, $9.19 per hour.

But no state's minimum wage is as high as the rate proposed by the Fair Minimum Wage Act of 2012. Sponsor Sen. Thomas Harkin, D-Iowa, would like to see the wage raised to $9.80 two years after enactment of the act. The bill was introduced in July and is in committee.

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