Florida Finds Little Trauma, Drama from Wage HikeDemocrats say that raising the federal minimum wage will be a priority when they take control of Congress. Would such a measure help low-wage workers or lead to layoffs? Florida, which raised its minimum wage two years ago, provides some clues.
Herb Kornblau is co-owner of a smoothie and salad restaurant at a mall in Ft. Lauderdale. He says he can't find people to fill $9-an-hour jobs.
Frank Langfitt, NPR
Frank Langfitt, NPR
Mike Jacobs used to work for a big restaurant chain; now he's opening his first restaurant. He thinks chains opposed a minimum-wage increase not because they were worried about laying off workers, but because they were concerned about the impact on profits.
Frank Langfitt, NPR
Florida is one of 28 states that already have laws requiring a minimum wage higher than the federal standard. (Click enlarge to see which other states require employers to pay more than the federal minimum).
Scott Stroud, NPR
Scott Stroud, NPR
Florida is one of 28 states that already have laws requiring a minimum wage higher than the federal standard.
Scott Stroud, NPR
California's minimum hourly wage is $6.75. In Oregon, workers start out at $7.50 per hour. Find out how state laws on the minimum wage differ. (Courtesy of the Department of Labor.)
A Primer on the Minimum Wage
Congress has been slow to raise the minimum wage. The last federal increase occurred in September 1997. Since then, the purchasing power of the minimum wage — after accounting for inflation — has deteriorated by 20 percent. Scroll down for more.
When Democrats take charge of Congress next month, one of the first items on their agenda is raising the minimum wage from $5.15 an hour to $7.25 over the next several years.
Businesses often complain that increasing the minimum wage forces them to lay off workers. Some advocates say a higher minimum wage means real money for the working poor.
Recently, I visited one state — Florida — to see what actually happened after voters there raised the minimum wage two years ago. Back then, people on both sides of the issue were making dramatic predictions.
The restaurant and retailers associations backed a TV ad that likened the minimum wage to one more hurricane for the then-storm-ravaged state. "A jobs killer in a category all its own," the ad intoned ominously.
Proponents of raising the minimum wage ran an ad focusing on a fictional working mom named Paula, pictured carrying a bag of groceries in one arm, a child in the other and a second clinging to her leg.
"Paula works full time, trying to make ends meet and provide for her children," the ad said. "But like too many Floridians, her family lives in poverty."
Voters overwhelming sided with "Paula," and backed the increase which initially added a dollar to Florida's minimum wage of $5.15.
Was the Wage Hike 'Irrelevant?'
Two years after Florida raised its minimum wage, the dire warnings from those who argued the move would force businesses to lay off workers have not come true. But it's also hard to find someone — like the fictional "Paula" — who says the higher minimum wage has helped a lot.
Instead, you're more likely to find business owners who pay well over the minimum wage.
"It's irrelevant," says Herb Kornblau, who owns a salad and smoothie joint outside Ft. Lauderdale. "We didn't start paying more when the minimum wage went up, because you can't get good help for the minimum wage."
I found Herb through an ad he put on Craigslist. He's advertising for sandwich and salad makers at $9 an hour. But he's not getting much response. Why?
"The unemployment rate is very low," he says. "Everywhere I go, people are looking for help."
Florida's unemployment rate is just 3 percent. So the problem for many small businesses is not a higher minimum wage, but finding good employees who will work for much more. Kornblau doesn't know where he's going to find them.
"When the Christmas business comes here, I don't know what I'm going to do," he says, "because I don't have the right help or enough help to handle the anticipated rush."
Compensating with Cost-Cutting
Of course, expenses have gone up for some business owners because of the minimum-wage increase. But they haven't laid off lots of workers. Instead, many have found other ways to cut costs. Chuck Long runs a Beef O'Brady's — a sports bar for families. The minimum-wage increase added $15,000 to his payroll. Long passed some of the added costs on to his customers.
"A lot of our stuff went up 10, 20, 30 cents — certain items where we thought we wouldn't affect the consumer, or they wouldn't be sticker-shocked by it," he says. "Nothing on our menu ever went up more than 30 cents."
Long's colleague, Mike Jacobs, found another solution while working at Bahama Breeze, a Caribbean-style chain restaurant. His corporate bosses told him to cut complex menu items to reduce labor costs. So he got rid of desserts like the Chocolate Tres Leches.
"It was a great dessert, but very labor intensive," Jacobs says. "Making a cake, making a sauce to soak in the cake, letting it sit for 24 hours. So, that came off the menu."
Dire Scenarios Failed to Materialize
What about the warnings that the minimum wage would end up — as one of the ads put it — "hurting thousands of Floridians whose jobs will be outsourced overseas"?
In the last year, Florida has actually added 220,000 jobs.
And in the hotel and restaurant sector alone, the state gained nearly 30,000 jobs.
Mike Jacobs — who now runs his own Beef O'Brady's — doesn't think the chains were really worried about layoffs. It just sounded a lot better than focusing on what Jacobs calls the real issue: profit.
A minimum-wage increase "takes part of that bottom-line profit that corporate restaurants have to report to their stockholders," Jacobs says. "Profit is a big part of it, so they weren't a hundred percent honest, in my opinion."
Benefits of Wage Hike Oversold?
If opponents overstated the threats of a minimum-wage increase, advocates may have oversold the benefits, as well. They said the $1 raise would help thousands of Floridians pay for the basics: food, rent and health care.
Technically, that's probably true. But only about 150,000 people earned the minimum wage or below at the time — less than 2 percent of the state's work force.
And finding some of those people isn't easy. One reason I went to Ft. Lauderdale was because a union — the Service Employees International — said they could put me in touch with janitors who had benefited from the higher minimum wage.
But the first janitor I interviewed, a woman named Maria Vega, said she was actually earning more than $7 an hour when the minimum wage first went up. She wasn't affected at all.
We drove down to Miami, to the home of Marie Hector, a fellow janitor from Haiti. She said the minimum-wage increase had added $34 a week to her take-home pay.
But with her expenses — including $800 a month in rent — the raise wasn't nearly enough, Hector says.
"It didn't make any difference in my life," she said, speaking through an interpreter. "I need more money— 10, 12 [dollars an hour], not $6 or $7."
Federal Legislation Looks Likely to Pass
Supporters of increasing the minimum wage often tout the benefits to people like Hector, who is 40 and has four children. But a significant number who earn at or near the minimum wage are actually teenagers like Rachel Lynn. Lynn, 19, works as a waitress while attending college in Boca Raton.
Like Hector, Lynn says the minimum wage doesn't make a big difference, because she relies mostly on tips.
"It honestly doesn't matter to me that much as a waitress," Lynn says, "because I don't see my paycheck as a source of income. It's more bonus money in my pocket."
Congressional Republicans say they're open to lifting the federal minimum wage, as long as small businesses are protected. That means legislation will probably pass. What's less certain is how much of an impact a raise would have on the lives of workers.
Today, less than 3 percent of hourly employees in America make the minimum wage or less. And 28 states already have laws requiring a minimum wage higher than the federal standard.
The minimum wage is of maximum importance when it comes to welfare reform and poverty reduction. Learn more about how the value of an honest day's work is measured in the United States.
What is the minimum wage?
The federal minimum wage is $5.15 per hour for covered nonexempt employees. The Fair Labor Standard Act spells out who is and isn't exempt from the minimum-wage requirement.
Many states have their own minimum-wage laws. If an employee is subject to both federal and state minimum-wage laws, the higher of the two minimum wages applies.
Minimum-wage exceptions apply to workers with disabilities, full-time students, employees who receive tips, student-learners, and people younger than 20 during the first 90 days of their employment.
What about workers who receive tips?
Employers are required to pay their tipped employees $2.13 per hour in direct wages, if the following three conditions are met:
*The amount plus tips received equals the federal minimum wage or more.
*The employee keeps the tips.
*The employee regularly gets more than $30 a month in tips.
If an employee's tips plus direct wages do not equal the federal minimum hourly wage, the employer must make up the difference.
How often does the federal minimum wage increase?
The minimum wage does not increase automatically. In order to raise the minimum wage, Congress must pass a bill which the president signs into law.
Why has a federally mandated minimum-wage increase taken so long?
Congress has been slow to raise the minimum wage because many business groups are opposed, and many economists believe that increasing the wage will cause some jobs to disappear. The mainstream view is that increases in the minimum wage come with a price: fewer minimum-wage jobs.
How are states handling minimum-wage rates?
Across the country, states are debating minimum-wage rates. Many are raising the minimum wage through legislative action and ballot initiative. So far, 28 states and the District of Columbia have enacted minimum wages greater than those put in place at the federal level.
Since the last federal increase in September 1997, from $4.75 to $5.15, the purchasing power of the minimum wage — after accounting for inflation — has deteriorated by 20 percent. Adjusted for inflation, the value of the minimum wage is at its lowest since 1955. This year, state legislatures in Arkansas, Maryland, Michigan, North Carolina, and Pennsylvania raised their minimum wages above the federal level for the first time. Maine, Delaware, and Rhode Island — all states with minimum rates already above the federal level — passed additional increases this year.
Who benefits from the proposed minimum wage hike?
A lot of people would benefit from a minimum-wage increase, and not just those who work at minimum-wage jobs. There are millions of people who work for wages just above the hourly minimum who also would benefit.
Eleven percent of the work force, or an estimated 14.9 million workers, would receive an increase in their hourly wages if the minimum-wage rate were raised from $5.15 to $7.25 by 2008.
Among workers likely to benefit from the wage increase, 59 percent are women. Nine percent are single parents.
A wage increase benefits low-income families. Among families with children, the low-wage worker contributes, on average, more than half of the family's earnings. Forty-six percent of such workers contribute 100 percent of their family's earnings.
Who would be negatively impacted by the proposed wage increase?
Some low-skilled workers would likely see their jobs disappear. And there is another group that's hard to pinpoint: jobs that would have been created at $5.15, but won't be created at $7.25.
Whether the missing jobs disappear or never get created, it's primarily younger workers who are affected. Teenagers, dropouts and workers who only have a high school diploma — anyone who doesn't bring at least some specialized skills to the workplace could be hurt. Of course, they could also be helped. That's why an increase in the minimum wage is controversial.
Sources: U.S. Department of Labor; Economic Policy Institute; NPR News