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Minimum-wage raise has some businesses cutting back



Published: Sun, January 13, 2008 @ 12:00 a.m.

Higher prices and fewer employees are two effects of the increase in minimum wage.

By ANDREW GAUG

VINDICATOR STAFF WRITER

Never has the bare minimum meant so much to some local companies.

Business owners are cutting the hours of staff and raising prices after another increase in the state minimum wage.

A state ballot issue in November 2006 increased the minimum wage from $5.15 per hour to $6.85 per hour. It also provided for annual increases tied to inflation, so the new rate was set at $7 on Jan. 1.

Some local businesses have said they have had trouble adjusting their budgets to compensate for the wage increase.

Leonard Fisher, owner of Handel’s Homemade Ice Cream & Yogurt, said the wage increase caused him to decrease the amount of employees on a shift so he could tighten the budget.

“Typically if there were six people on a shift, now there’s five,” he said. “We’ve decreased man-hours by 7,000 hours in a year.”

Vincent Furrie Jr., one of the owners of a group of five local Sparkle supermarkets, said his company has cut back its staff as well.

“We’ve scaled back on part timers and had to cut hours,” he said. “We’re probably missing five or six people on a shift — we just can’t afford it.”

Some business don’t have to worry yet. Starting in July, wages will increase to $6.55 for small businesses making less than $255,000 a year or those with 14- and 15-year-old employees.

Other businesses such as Wedgewood Pizza in Austintown haven’t had a problem because it has always paid above minimum wage.

Those that do pay minimum wage,such as Boardman Lanes on Market Street, said they have had to do multiple things in order to pay their employees more.

Rob Thies, manager of the bowling alley, said he’s had to freeze wages for some workers.

“We haven’t had a raise in about a year,” he said.

Plus, bowling prices have been increased.

Furrie and Fisher also said they have had to raise their prices to make up for the loss revenue.

Curtis Reynolds, an associate economics professor at Kent State University, said a price increase is exactly what people should expect once the minimum wage was raised.

“This isn’t an increase in the traditional sense. It’s having the minimum wage be constant over time by indexing it with inflation,” he said.

Reynolds explained that, in previous years, the minimum-wage rate basically stayed the same while prices went up because of inflation. With the new minimum wage going up with inflation, it will allow people’s pay to increase with the prices.

Some businesses and economists said the minimum-wage increase ignores some key factors such as entry-level workers and other operating costs.

According to data from the nonprofit research group Employment Policies Institute, the unemployment rate for vulnerable groups such as high school dropouts and black teenagers in Ohio rose after the minimum-wage increase was implemented.

David Kreutzer, senior economist for EPI, said many businesses can afford the new rate, but others that don’t sell as much, including some urban businesses, are suffering, he said.

Fisher said the wage increase leaves little room for error.

“The employees that were listed as ‘so-so,’ we’ve had to tell those type of individuals that they will have to look elsewhere,” he said. “We just can’t afford to spend more money training them.”

Furrie, whose company owns Sparkles in Cornersburg, Beaver Township, Columbiana, Salem and Lisbon, said the increase hurt longtime employees because the stores can’t afford to bump their wages up along with the newcomers’ higher pay.

Other increases in things such as fuel costs and prices of products such as petroleum and paper also have made the wage hike more painful.

Fisher said prices can only rise so high as people are willing to pay for them.

“Who’s going to pay $5 for an ice cream cone?” he said.

Furrie said he disagrees with tying the minimum wage to inflation.

“I predict next year inflation is going to be high due to fuel prices. They tied [minimum wage] to a burning wagon. It’s just one of those things they mandated and we have to live with it,” he said.

In contrast, Reynolds said the minimum wage is good for companies.

“It allows for a smooth transaction,” he said, “In some ways, businesses should be happy with a gradual increase as opposed to waking up seeing the wages of their employees increase a large amount.”

Fisher said he’s thankful for his business but feels bad for companies that are hurting financially because of the wage increase.

“I’m fortunate that I own multiple locations, but for someone that owns one location, it’s very hard to swallow,” he said.

agaug@vindy.com


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