Employers face rise in minimum wage Thursday

Missouri workers at the bottom of the pay scale will get their second raise of the year Thursday, and they may get another raise Jan. 1.

The federal minimum wage will increase to $7.25 an hour, up from the current level of $6.55 an hour. In Missouri, the increase will be 20 cents an hour because the state minimum wage increased to $7.05 an hour Jan. 1. Because the Missouri minimum wage is indexed for inflation, the state Department of Labor and Industrial Relations will announce soon whether another increase will be required Jan. 1 as well.

While full-time workers will see an extra $8 in their weekly paychecks from the increase, employers are worried that they will be forced to raise prices and provide raises for workers earning close to the minimum wage.

"If I am able to pay more than minimum wage as a general rule to reward employees for loyalty, dependability and production effort, I don't want to erode that," said David Kimes, owner of Patrick's Cleaners, which has locations in Jackson and Cape Girardeau.

Only the youngest and most inexperienced people seeking work at Patrick's are offered minimum wage, Kimes said. Older and more experienced workers expect more and Kimes tries to meet those expectations, he said. Those who are making $1 more than the minimum, for example, expect to continue to be that far above.

"Over a short period of time, 30 days, maybe six months, maybe the next pay cycle, whatever that may be, I need to make a concentrated effort to get my people moved up," Kimes said.

Missouri voters approved a ballot measure in 2006 that set the state minimum wage at $6.50 an hour or the federal minimum, whichever is higher. The ballot measure also imposed the rule increasing the wage at the same rate as prices, with the newly indexed wage taking effect every year on Jan. 1.

In 2006, the federal minimum wage was $5.35. Congress has since increased the minimum wage as part of a bill that raised the wage in three steps. The increase taking effect Thursday is the third step and is the first time since the 2006 vote that the federal minimum exceeds the state minimum.

The wage increase puts pressure on the prices Kimes charges, he said. The effect is more pronounced in businesses that rely heavily on workers making close to the minimum, he noted, because it puts pressure not only on his bottom line but also increases costs for his suppliers, who pass the increases on.

"I either have to do more volume or I am going to have to raise my prices," Kimes said. "My bottom line is eroded."

Only employers with gross receipts of less than $500,000 a year are exempt from the minimum wage, said Wanda Seeney, spokeswoman for the state labor department. All other employers are required to pay at least $7.25 an hour.

That next raise on Jan. 1 isn't certain. In the 12 months ending in June, prices fell 2 percent, according to the U.S. Department of Labor's Consumer Price Index for urban wage earners and clerical workers. Barring a spike in prices during July, the adjustment would be zero, Seeney said. "The CPI base will be based on the minimum wage of $7.25," Seeney said. "If the CPI decreases, the wage will still be $7.25 because it cannot be decreased."

Cape Girardeau city government, which spends about $800,000 on part-time employees, built money into the budget for this year to anticipate the increase. The total cost, finance director John Richbourg said, will be less than $20,000. No allowance was made in the budget for another increase in January, but with inflation under control that shouldn't be an issue, Richbourg said.

"I wouldn't suspect it would be a whole lot," he said.

When the new state minimum wage took effect Jan. 1, 2007, Cape Girardeau sought to avoid the pay raise. The state law did not apply, the city contended at the time. There will be no arguments with the latest increase, he said.

"We think the federal minimum wage applies to us even though we still don't think the other minimum wage applied to cities," Richbourg said.

The increased minimum wage is just one more cost to deal with, Kimes said. One way to control costs is to cut hours, a move he said defeats the purpose of a minimum wage increase.

"I am very happy for employees that they are going to be making more money," Kimes said. "Now I have to deal with the pressures on the business to make sure I don't come in and cut their hours."

rkeller@semissourian.com

388-3642

Pertinent addresses:

610 Route E, Jackson, Mo.

Broadview at Independence Street, Cape Girardeau, Mo.

401 Independence St., Cape Girardeau, Mo.