Minimum wage hike could hurt workers, York County business owners say

Feb. 24--CLOVER -- It's shortly before noon on a Friday, and the staff at the Patti-O Grill is preparing to move into high gear. The gravel parking lot is almost full and so, too, are the booths and tables in the simple but homey brick restaurant.

It's a good feeling for owner Patti Imler. She opened the grill eight years ago, transitioning from building custom homes to cooking food when the housing market tanked during the recession. She worked for five years before drawing a paycheck. Now she has regular customers who seek out her location on Old North Main Street, a block off Clover's main drag, for lunch or dinner.

But Imler wonders how long this can last. She's following the minimum wage debate in Washington, where President Obama is pushing for an increase from $7.25 to $10.10 an hour.

The effect of a $10.10 entry-level wage on her business?

"Devastating ... scary," she responds. The impact, she said, would likely be higher prices, no raises, staff cutbacks and cutting her own paycheck. Increasing the minimum wage would cost her about $1,000 a week in salary, payroll taxes and higher costs, money that could go for other employee raises or be reinvested back into the business, she said.

Imler quickly adds she is not opposed to paying slightly more for entry-level workers, maybe $8 an hour, or a rate that's tied to the local economy and not a national statistic. But she doesn't see how things would work if she has to pay $10 for a dishwasher when her cooks are making $15.

Neither do her cooks.

"It's not fair one bit," said Calvin Gilbow of a $10.10 minimum wage.

It's good for the minimum wage to go up as prices are going up, Gilbrow said, but "to pay someone with no experience $10 ..."

Imler is not alone. Many small business owners in York County also are wondering how they will make it if a much higher minimum wage is mandated. Many are sympathetic to an increase but said there's not much room in their budgets to make adjustments if labor costs rise dramatically.

"Small businesses can't keep writing checks," said Dilip Patel, owner of four hotels in York County.

The conversation over raising the federal minimum wage gained momentum in January when President Obama said he will require all new federal contractors to pay $10.10 an hour. He has also endorsed a bill in Congress to increase the minimum wage to $10.10 by 2016. Currently 19 states and the District of Columbia have mandated a higher wage, ranging from $7.40 in Michigan to $9.32 in Washington. South Carolina does not have a state minimum wage.

The momentum for higher minimum wages in the private sector received a boost last week when the Gap -- operator of Banana Republic, Old Navy and a host of specially themed Gap stores -- announced it will set $9 as the minimum hourly rate for its U.S. workforce this year and a minimum of $10 next year. Gap said this move would ultimately raise pay for 65,000 of its 90,000 U.S. employees.

Retailers such as Wal-Mart and Sears Holdings, which operates Sears and Kmart, said they are evaluating their wages too.

The federal Bureau of Labor Statistics estimates that about 1.67 million people -- about 2 percent of the work force -- make the minimum wage. About 60 percent of those people are in the retail, leisure and hospitality industries.

The Economy Policy Institute, a nonpartisan think tank, estimates increasing the minimum wage to $10.10 would affect as many as 21.3 million people, the bulk of that number people making between $8 and $9 an hour. In South Carolina the institute estimates that 27 percent of the state's work force, about 487,000, would be affected if the minimum wage were increased to $10.10. The average annual wage would increase by about $2,300 if the hourly required rate is raised, according to the institute.

Economists, often using the same set of data, have come to different conclusions over raising the minimum wage.

Conservative economists say raising the minimum wage would affect the demand for jobs. The nonpartisan Congressional Budget Office last week estimated that increasing the minimum wage would reduce total employment by 500,000 workers, maybe more.

Liberal economists say a benefit of a higher minimum wage is the number of workers who benefit from an increase in income. The Congressional Budget Office estimates as many as 26 million workers would see a pay raise if the minimum wage is increased, representing $31 billion in increased paychecks.

"It's a net positive for small business," said Frank Knapp of the South Carolina Small Business Chamber of Commerce. While the chamber has no official position on increasing the minimum wage, Knapp said an increase means more people spending locally. "That's a net positive, more money on Main Street," he said.

Locally, many workers in what historically have been lower-paying jobs are already paid more than minimum wage. Toy Rhea of Gala Affairs said he pays those who put up and take down the tents for parties more than the minimum wage.

Workers who drive the forklifts and move barrels of chemicals are paid more than the minimum at the Red-Line plant, said Dave Oxendine, business development manager there. So are those who sort recycled materials at Renew Resources, said owner Todd Bernard. The company recycles material such as antifreeze, used oil filters, batteries, light bulbs, scrap steel and wood pallets.

But Oxendine noted he may not be immune to an increased minimum wage, as some of the people he contracts with will be affected. He expects them to pass along the increased costs. He said he could absorb some additional costs in his lubricant business but products made for the textile industry have little room to adjust prices.

Rock Hill city government pays above the the minimum wage. According to a city analysis, only 45 seasonal jobs in concessions and admissions that are filled by youths pay less than $10 an hour. The minimum salary for a starting crew member on a garbage truck is $12.17, and a starting clerk in the warehouse makes $12.69, according to the city.

At Metrolina Greenhouses, which recently purchased Stacy's of York, the starting wage is $9 an hour, said company president Abe Van Wingerden. In addition to the starting wage, Metrolina funds workers' health care insurance, and workers are eligible for company profit sharing.

"For those incentives we can raise expectations for our employees in what they produce for the company," Wingerden said. This lowers the cost of production over time -- less turnover, less absenteeism, more efficiency, allowing Metrolina to lower its wholesale costs, he said.

Those who do pay minimum wage note that typically the hard worker is rewarded with a raise.

Mark Cieslikowski, part owner of the Q-2-U restaurant in Lake Wylie, said the restaurant starts new workers at the minimum wage and increases it after six months if the employees show they know what they are doing.

"Some never get off minimum wage," he said, because "you can't rely on them."

Kha Stewart, owner of Plato's Closet in Rock Hill, said there is little flexibility her business. The light bill, Internet bill and the rent don't change, she said. Most of the business of reselling clothes is labor intensive, and she employs a number of teenagers.

Raising the minimum wage would have a two-fold effect, she said.

Stewart said she would likely look for people with experience if she has to pay $10 an hour.

"That would eliminate most teens," she said.

Stewart now hires teens with no experience at minimum wage and lets them prove their worth. "We give them the incentives to prove themselves," she said -- and several have done just that. She said some of her employees started at $7.25 an hour and in just eight weeks were promoted to managers, making more than $10 an hour.

A minimum wage hike could also effect her prices, which are typically 50 to 70 percent of retail. That price structure is one of the reasons for Plato Closet's success.

Others see little benefit to raising the minimum wage, noting that any increase will be offset by increased costs.

"If wages go up 3 percent and prices go up 3 percent, you are not better off," said Lou Patuosco, an economics professor at Winthrop University.

"The benefit (of raising the minimum wage) is more symbolic than anything else," he said.

Patuosco said the problem is the minimum wage has not kept pace with inflation. At $10.10, the minimum wage would be just shy of the nation's highest minimum wage of $1.60 per hour in 1968, which, when adjusted to 2013 dollars, is around $10.71.

The last time the minimum wage was increased was in 2009, when it was raised from $6.55 to $7.25 per hour. Before 2007 the minimum wage had been stuck at $5.15 per hour for 10 years.

Had minimum wage been tied to inflation you would not see a dramatic increase, he said.

Nonetheless, Panuosco said, small businesses would find a way to survive, discovering ways to compete and ways to increase productivity. "In the last recession the number of people employed went down but productivity remained the same," he said.

At the Patti-O Grill, Ashley and Andre Hutchins are sitting at the bar, eating Yuppie Puppy sandwiches.

Ashley said a higher minimum wage won't make a difference because when wages increase, prices increase. If costs increase at the grill, she said they would probably still come, but it might be harder for them to justify eating out.

Imler, the owner, said that's one of her biggest concerns. She estimates the price of her 10-ounce ribeye steak would go from $13.95 to $20.95 if the minimum wage rises. Most of her patrons are making about $12 an hour. "They would never pay that price here," she said.

She's also concerned how a higher minimum wage would affect what she can do for the community. She has been a supporter of the South Carolina Burned Children's fund for five years, helping to raise more than $7,000 last year, and she has a goal of raising $10,000 this year.

But if she has to work more, she may have less time for others.

"That's what scares me more than anything else," she said.

Don Worthington -- 803-329-406

___

(c)2014 The Herald (Rock Hill, S.C.)

Visit The Herald (Rock Hill, S.C.) at www.heraldonline.com

Distributed by MCT Information Services