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Minimum wage set to increase

Sharon Caskey Hayes • Jul 7, 2007 at 12:00 AM

Come July 24, the nation's minimum wage will begin a three-step rate increase, boosting the take-home pay for millions of Americans.

But for many small and medium-sized businesses, the federally mandated wage hike could mean pain in the pocketbook.

"Whenever the government involves itself in the market, there is going to be an impact. Even the best social policy has winners and losers. And unfortunately, small businesses are often the losers, and that certainly is the case with this," said Mike Donohue, a spokesman for the National Federation of Independent Businesses in Washington, D.C.

Earlier this year, Congress passed and President Bush signed legislation calling for the first increase in the federal minimum wage since 1997.

The new law increases the wage in three steps. It will initially rise from $5.15 to $5.85 per hour on July 24. Next summer, the wage will increase to $6.55. And in the summer of 2009, the wage will complete its final step increase to $7.25 an hour.

The new law is expected to impact 12.5 million workers in this country.

Proponents of the legislation say it's overdue. According to the Economic Policy Institute in Washington, D.C., the real value of today's minimum wage is less than it has been since 1951.

"We believe that a modest increase in the minimum wage would improve the well-being of low-wage workers and would not have the adverse effects that critics have claimed," the EPI contends. "While controversy about the precise employment effects of the minimum wage continues, research has shown that most of the beneficiaries are adults, most are female, and the vast majority are members of low-income working families."

On the flip side, opponents of the wage increase say it will put an undo hardship on businesses, and ultimately cause those businesses to cut job levels, causing an adverse impact on the low-wage workers that the minimum wage is designed to help.

"For start-up businesses, you're working on very tight budgets with little margin of error. The money just doesn't appear out of nowhere. The money has to come from somewhere, and so for start-ups, small businesses with tight bottom lines, very often the small business owner will just eat up the extra cost themselves ... that's less money to spend on healthcare or new equipment or whatever," Donohue of the NFIB said.

Locally John Harrison, owner of The Ford System in Kingsport, said he's opposed to the minimum wage increase. He said his business starts employees at a rate higher than the minimum wage.

"But when they raise that minimum wage, everybody expects a corresponding increase in their hourly rate," Harrison said.

He said he could pass those wage increases onto customers, but that could lead to lost business.

"For some reason, the liberals think you ought to be able to live on minimum wage with a family. Hell, you can't do that," Harrison said. "What they don't understand is, the minimum wage is a starting wage. And if you're worth a hill of beans, people are going to pay you a decent wage. They really are."

But Kingsport attorney Bruce Shine said it's not that simple. He said minimum wage jobs give many unskilled employees entrance into the work force.

"And if they're working, they're making money and they're part of society. Otherwise, they're outside just looking in, and we're paying for it," Shine said.

He said the number of people who actually are paid minimum wage "is not that great."

"And those that are making minimum wage in many instances are doing some of the hardest work in society - work that does not have in many instances any long-term growth potential," Shine said.

He compared this nation's minimum wage with England's, where low-wage workers get the equivalent of nearly $9 an hour.

"Those people who make minimum wage (in the United States) desperately need the increase," Shine said.

And contrary to what business groups claim, an increase in the minimum wage "doesn't destroy jobs," Shine said.

"People still hire," he said.

"I read somewhere that if a company is so marginalized that the minimum wage has an adverse impact on it, maybe they ought not be there," Shine said.

At the NFIB, Donohue agreed the minimum wage hike doesn't impact a lot of the nation's workers.

"But it does have a cost, and it's paid for by small businesses," Donohue said.

Harrison said businesses will ultimately lose because of the minimum wage increase.

"They're picking away at us," he said.

"It's probably going to kill us in the end," he said.

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