Workforce Gets A Raise; Not Everyone Is Happy

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Millions of Americans will see a pay increase Friday when the national minimum wage jumps to $7.25 per hour. Critics say now is exactly the wrong time to increase employer costs. Finance expert Boyce Watkins of Syracuse University, David Ferreira of the United States Hispanic Chamber of Commerce and small businesswoman Renee Amoore discuss whether the increase helps more than it hurts.

MICHEL MARTIN, host:

I'm Michel Martin and this is TELL ME MORE from NPR News.

Coming up, on the 40th anniversary of the first walk on the moon, we'll speak to the first African-American to walk in space. Dr. Bernard Harris will talk to us about what this day means to him and about his efforts to get young people interested in math and science, that's a little later. But first, this Friday a raise is coming for more than four million Americans. That's because the federal minimum wage will go up to $7.25 an hour, the final wage hike in a three-step boost to the minimum wage passed by Congress two years ago. For a full-time worker, that could mean an extra $1500 a year before taxes. But while workers will certainly welcome the extra cash, others say the timing could not be worse as employers struggle to hold on in this ongoing recession.

We wanted to talk more about this. So we've called Boyce Watkins. He's an assistant professor of finance at Syracuse University. He visits with us from time to time to talk about the economy and business issues. Also with us, David Ferreira. He's vice president for government affairs at the U.S. Hispanic Chamber of Commerce. And Renee Amoore, she's a small business owner and political activist. You may have heard her speak at the Republican National Convention last summer. Thank you all so much for joining us.

Professor BOYCE WATKINS (Finance, Syracuse University): Thank you.

Ms. RENEE AMOORE (Small Business Owner, Amoore Group): Thanks for having me.

Mr. DAVID FERREIRA (Vice President, Government Affairs, U.S. Hispanic Chamber of Commerce): Glad to be here.

MARTIN: Let us start with you, Boyce. Who earns the minimum wage? And I understand that half of minimum wage workers are under 25 years old. What else can you tell us? Are they concentrated in certain industries, certain types of jobs?

Prof. WATKINS: Well, a lot of workers in the restaurant industry earn a minimum wage. Many of the minimum wage earners tend to be minorities and women. Of the half that are under the age of 25, about half of that half are actually teenagers. And so - so really you're not talking about a big percentage of the workforce. But at the same time, those individuals who are affected who actually have families, about five million children come from families of minimum wage earners. The increase is very important to those families. But it's not necessarily of huge consequence on the national level.

MARTIN: I wanted to ask about that because I have to tell you, even in a recession if I tried to pay a teenage babysitter in my neighborhood $7 an hour, he or she would laugh in my face. So I wondered, you know, how much impact it really is going to have?

Prof. WATKINS: Well, it...

MARTIN: It's about an 11 percent raise. So that sounds like a big number. But does it really have the ripple effect?

Prof. WATKINS: Well, it has a ripple effect amongst those who are in the middle of the ripple. You know, let's be clear, the minimum wage has not increased at the rate that it should have increased if you are a fan of supporting low wage workers. The reason I might advocate for an increase at this time is because, while it doesn't cost us a lot as a nation to increase the minimum wage, the truth of the matter is that those individuals affected are really going to benefit from this increase.

The other thing is that you can argue that a recession is a bad time to increase the minimum wage but actually the minimum wage was implemented during the Great Depression. And so, this notion that it's somehow going to deepen the recession by increasing the minimum wage at this time, I think that that assumption is a little bit flawed.

MARTIN: David, what are your members saying? Now most of your members are small business owners. Do you have any sense of how many of them pay the minimum wage?

Mr. FERREIRA: Well, 91 percent of small businesses pay above the federal minimum wage. So what they're hurting for right now is access to cash, access to working capital, being able to get to those loans. So, the things having to do with ARC loans and SBA or CIT not getting a bail out, those are bigger picture items that are actually affecting them and the bottom line a lot more than say a minimum wage increase.

MARTIN: So you don't think it will have a big impact on your members? They're not complaining to you about anything?

Mr. FERREIRA: Well, it affects particular industries. It affects retail, it affects restaurants in particular. And especially those folks they usually hire, those teenagers in the summer or have low wage workers on the front line.

MARTIN: Swimming pools, for example.

Mr. FERREIRA: Exactly.

MARTIN: The swimming pool, the lifeguard at the swimming pool, the restaurant - fast food restaurant and so forth.

Mr. FERREIRA: Exactly.

MARTIN: Mm-hmm.

Mr. FERREIRA: And those folks and those businesses are most likely going to have eat the cost rather than passing it on to the consumer. Because they - it's already a soft market in retail and sales.

MARTIN: Renee, what about you? You are a small business owner. You own a number of small businesses. So what about you? Is this going to affect your bottom line?

Ms. AMOORE: Absolutely. I'm so glad I get to weigh in right now because to me it's an issue. When you have a not-for-profit - we have several not-for-profits that deal with college students that are working for us that may be minimum wage. And we have 100 of them at least in one of our companies. So, that does affect us and it does affect our bottom line.

And with all the other things that your two guests have said, working capital, things like that, that's an issue. And to me, what's going to happen is some of those students who are using these jobs for co-ops or to pay for school, what's going to happen to them is that we could not have, you know, we could, I heard your commercial or something in the intro talking about more workers in the street. They could be turned out.

MARTIN: Is that really something you're considering?

Ms. AMOORE: That's something that our executive committee has been talking about, my executive team and looking at what can we do, how can we do it? Because we have a large number in four different companies and just, a hundred in one company. So, it does hit us and it hits us hard. If you're running group homes, for example, service companies, that's an issue, not just restaurants but people with disabilities that we service. Some of the people with disabilities work with us for minimum wage. And that's the only position that they might be able to get because possibly of their disability. So, I think we have to look across the board at the whole gamut, the total picture. You know...

MARTIN: Hold on, Renee. Let me just jump in one second just to let people know what we're talking about. If you're just joining us, you're listening to TELL ME MORE from NPR News. And we're talking about the federal minimum wage increase; it's scheduled for Friday. Our guests are Boyce Watkins of Syracuse University, David Ferreira of the U.S. Hispanic Chamber of Commerce. We're presently speaking with Renee Amoore. She's the founder and president of the Amoore Group. And she's a small business owner.

Obviously the voice we are missing from this conversation is that of a person earning and living on the minimum wage. And we hope to bring you a conversation with that perspective later in the week. And if you'd like to participate, please call us. You can call our comment line at 202-842-3522. Or you can go to the TELL ME MORE page at npr.org. Renee, continue with your point if you would. The workers you have who are earning minimum wage, are they mostly young folks? Do you have folks who are in fact supporting themselves...

Ms. AMOORE: Oh absolutely.

MARTIN: …on this wage.

Ms. AMOORE: People with disabilities. There's people with wheelchairs. There's people that have, you know, hearing impairment, those type of folks. Some of them are working, you know, at minimum wage. This is the only position they could get. We're one of the few employers that really bring in people with disability and get special equipment so that they're able to hear on the phone or do whatever is necessary to make it happen for them to work. And again, if you're dealing with group homes, people with disparities which we service, there are a lot of those people making minimum wage because they only maybe have a high school diploma or they're working towards their degree.

This is a rough time for us because of all the other things we're talking about, trying to give people a cost of living increase, their regular yearly raises. So, we're looking at the total picture, which is hard for us. We understand that it's important for them to get the raise but at this point it is not a good time for us.

MARTIN: Boyce, the obvious issue is, does this help more or hurt more? You have to assume if these workers get this raise they will spend it. So that puts more money into the economy. But it does them no good if employers like Renee decide that they can't afford it and they're actually going to pare their payrolls in response. And I understand that I'm asking you to speculate, but what is your - what is your sense of how this is going to play out, at least in the short term?

Prof. WATKINS: Well, I can speak on these issues from a couple of standpoints. One is as an academician. The data doesn't support the idea that unemployment increases as a result of an increase in the minimum wage. Actually even in the restaurant industry, where you tend to hear the greatest complaints about increases in the minimum wage, when the last increase took place, 76 percent of all restaurants did not reduce employee hiring. They didn't lay anybody off. The other thing is that if you look at the data, these effects, these employment effects due to increases in the minimum wage tend to diminish over time.

Now as a small business owner myself, what I'll say is that I am probably a little bit more of a capitalist than some of my friends. I believe in compassionate capitalism, which puts me in line with President Obama on this. And one thing I can tell you is that the job of the firm manager - in Finance 101 we teach that the job of the company's manager is to maximize shareholder wealth. And so, this idea that increasing wages will hurt the company in terms of reducing their wealth, reducing their profitability is absolutely true.

The fundamental question becomes, what sort of a reduction in profitability can these companies endure? And if you look at the massive profitability that we experience in the United States, some could argue that we can afford to pay our lowest wage earners a little bit more money and still make money ourselves.

MARTIN: But, here's the thing though, Boyce, the last increase was last summer, then it went up 70 cents. And then the prior increase was the summer before that. Now, that's technically before the recession started. So, you're saying that you think historically there isn't the case, that it doesn't depress hiring. But this is at a - we're in a 26-year high in unemployment. Do you think that the past experience is relevant?

Prof. WATKINS: No, I don't think that these increases in the minimum wage have led to the massive unemployment that we've experienced. The unemployment came as a result of just very bad fundamentals in the economy, very bad use of capital, very bad decisions by the people at the highest levels, not those who are the poorest. And the other thing that's important to remember about this minimum wage increase is that 18 states and D.C. already had a minimum wage of $7.25 before this increase was implemented.

And nine states already had a minimum wage that was above the previous number of $6.55. So, you're really not affecting that many people in that many states. But again, those are affected are really going to see a benefit from this, whereas the cost for us as an economy really isn't that high.

MARTIN: David, what about you? Do you - you were telling me earlier that the bigger issue for your members is health care costs. So that even - though this 11 percent increase, it's a double-digit increase in a short period of time if you do - if you are paying the minimum wage, that the bigger factor for most of your members is still health care costs.

Mr. FERREIRA: Well, it's access to capital, health care costs, those items that take a big chunk out of the bottom line. Majority of the businesses shedding employee-sponsored insurance coverage are firms with less than 50 employees and up to about those with a hundred employees. Because any firm - 99 percent of firms with more than one hundred employees provide health care coverage. And they get to work in insurance market that's completely different than ones small businesses purchase.

They pay on average 18 percent more for their health care premiums. Their premiums go up by double digits every year in terms of the rate of premium growth. It hurts them. And that's the reason why a lot of them have been shedding health care. And that's why we want health care reform. Now we also want health care reform that is paid for soundly. And not paid for on the backs of small businesses. Last thing we want to do is victimize the victim.

MARTIN: Hmm. Okay, Renee, very briefly because we only have a minute left. We are going to take a short break. We're going to come back to this panel after we take that break. But, can I just sort of pin you down once again? You're telling me, you are seriously considering trimming your payroll because of this.

Ms. AMOORE: Oh, absolutely. And David was right on target. We also pay for insurance for our employees. So again, I'm looking at the total package, not just the whole wage increase but you have to look at the health care that we pay for. The new taxes that people are talking about small businesses have to deal with. We're the fastest growing entity, you know, in the country and we're suffering the most.

MARTIN: We need to take a short break. As I mentioned, we'll be right back with our guests. We're talking about the federal minimum wage hike. It's due to go into effect this Friday. Our guests are Boyce Watkins of Syracuse University, David Ferreira of the U.S. Hispanic Chamber of Commerce and Renee Amoore, the founder and president of the Amoore Group. She's a small business owner. Please stay with us. We'll talk about this issue for a few more minutes in our next conversation. Stay with us on TELL ME MORE from NPR News. I'm Michel Martin.

(Soundbite of music)

MARTIN: I'm Michel Martin. And you're listening to TELL ME MORE from NPR News.

From NPR News, coming up, as family and friends struggle to understand what happened to loved ones buried at the Burr Oak Cemetery outside Chicago, we explore why historically black burial grounds came to be, why they matter and what's happening to them. That conversation a little later.

But first, we're going to continue this conversation about the federal minimum wage increase set to take effect on Friday. More than four million workers will see their hourly wage rise from $6.55 an hour to $7.25 an hour, that's an 11 percent raise. It's the third and final increase to the minimum wage mandated by Congress two years ago. Our guests are Boyce Watkins, an assistant professor of finance at Syracuse University, David Ferreira, the U.S. Hispanic Chamber of Commerce's vice president for government affairs, and Renee Amoore, a small business owner and Republican party activist. I want to thank you all for staying with us.

And Renee, I wanted to ask, so this is the law, it's going forward. What would you like to see going forward in terms of policy around wages…

Ms. AMOORE: You…

MARTIN: …as Boyce pointed out, the minimum wage has been in effect since the Great Depression, seems to be settled policy. But, what do you think you'd like to see going forward?

Ms. AMOORE: Well, you know, like I said earlier, first of all, business-wise, you know, I think a lot of people have to understand the whole process of, you know, the whole wage increase piece, the policy, that kind of stuff. So, it's really - we do because we understand government, but really training and educating a lot of small businesses about it. You know, I think it's important for people to get an increase because people have to survive, they have to live, Michel, that's the bottom line.

But on the other hand we have to look at, you know, I would like to see more discussions around it and how they go about the increases because that is ever so important. Because you have a lot of small businesses literally closing. I can speak - for Pennsylvania that people just are not going to survive. So I would see - I would like to see more talking between government, small businesses, the chambers involved, that particular piece. I know our chamber here is, and I sit on the board of Pennsylvania chamber and also the Philadelphia chamber, the whole regional chamber. But I think it has to be more talks to help people, small businesses in particular understand what's going to happen and how they can survive.

MARTIN: Boyce, what about that? How do you think, going forward, that this wage policy should be addressed? I mean, one of the points you were making is that this is overdue from an economic standpoint, from the standpoint of the people earning the minimum wage that there was a long gap in increasing the minimum wage. How do you think this should go forward? Do you think there should be a scheduled review of the legislation? What do you think?

Prof. WATKINS: Well, I think there certainly should be a scheduled review because we have to understand that the incremental increases in the minimum wage, which started just - two or three years ago, that they were implemented during a time in which we had a very different economic scenario in our country. And we can't ignore this recession as we implement this increase.

The increase should also be supplemented with help to small business owners so that they can deal with the more important issues mentioned earlier, like access to capital and the cost of health care. And really, I see this whole issue as more of an issue of advocacy. This isn't really going to help or hurt the recovery very much. But if you advocate for women, children, minorities and the poor then you can argue that these individuals are due a raise, particularly since you're sort of facing the backdrop of our bailouts of some of the wealthiest Americans, you know, in our economy. So if you advocate for those individuals, then you have to support the minimum wage.

MARTIN: David, final thought from you.

Mr. FERREIRA: Access to capital is the big point. Obviously, the increase in minimum wage is going to hurt some small businesses out there. Now, the folks that - the small businesses we talked to, what they want is to be able to get loans that they can't get, that working capital that they need to be able to pay (unintelligible), to be able to make payroll. ARC loans from SBA are really important. Please go to Web sites and look for those at the SBA Web site, up to $35,000. Treasury is now looking into working capital loans. It's still in concept phase. We really hope they come through with it. And we really hope the administration can come through and help CIT, which is the biggest lender to small businesses and especially minority-owned small businesses.

But unfortunately so far it has been blocked by some folks within the administration. There's internal struggles within the administration about that. And we hope they'll come through.

MARTIN: David Ferreira is the vice president for government affairs for the U.S. Hispanic Chamber of Commerce. He was here with me in our Washington, D.C. studio. Thank you. Boyce Watkins is an assistant professor of finance at Syracuse University. He was with us from Syracuse. And Renee Amoore is an entrepreneur and a political advisor. She was with us from Philadelphia. Again, if you're supporting yourself or your family earning the minimum wage, we would like to hear your perspective on this debate.

Please call us at 202-842-3522 or please contact us online at the TELL ME MORE page at npr.org. We'd like to have a conversation with your perspective later in the week. And I thank you all so much for joining us.

Ms. AMOORE: Thank you.

Mr. FERREIRA: Thank you.

Prof. WATKINS: Thank you.

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