President discussed increase to $10.10 per hour
Lifting federal contract workers’ minimum wage to $10.10 per hour, as President Barack Obama proposes, isn’t expected to affect contractors very much, but extending that pay to workers across the board would be big, especially in Louisiana where a high percentage of workers make minimum wage or less.
Hundreds of thousands of Louisiana residents will benefit and that could boost the state’s tax revenue, said Jan Moller, director of Louisiana Budget Project.
But Pat Felder, who co-owns Felder’s Collision Parts in Baton Rouge, said raising the minimum wage would have an inflationary ripple effect that would hurt small businesses. Felder is active in the National Federation of Independent Businesses, a national small business advocacy organization.
Felder said she pays all 10 of her employees above the current $7.25 per hour minimum wage. “But if they move the minimum wage to $10 an hour, then all of the sudden, a lot of the people I have need a raise,” she said. “Then what do I do? That changes my profit margin.”
Small business owners pay employees as much as possible to ensure that they get the best workers, Felder said. “You get what you pay for,” she said. “Every business pays workers commensurate with what they can sell their products for.”
Figures from the federal Bureau of Labor Statistics in 2012 show that, 7.1 percent of workers in Louisiana, or 74,000 people, made the current minimum wage of $7.25 an hour or less. Only Idaho, Texas and Oklahoma had a larger percentage of the workforce making minimum wage or less. Figures for people who make between $7.25 and the proposed $10.10 wage were not available.
However, one estimate of workers in Louisiana who would directly benefit by the wage hike jumps to 320,000 by 2016, according to a report released last month by the Economic Policy Institute, a think tank that focuses on the needs of low- and middle-income workers.
Another 143,000 Louisiana workers, who currently make salaries slightly more than $10.10 an hour, would also be affected, the report says. For example, shift supervisors at a restaurant could get raises because they are in charge of workers who were making $9 an hour and suddenly inch closer to the supervisors’ pay with a $1.10 raise.
Based on those figures, a significant minimum wage hike would impact 26.5 percent of the state’s workforce, EPI estimates.
David Cooper, a policy analyst for the EPI, said the state figures were based on the Current Population Survey, which is conducted by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics and is the same method for determining the state unemployment rate.
Forty-seven percent of workers affected by a higher minimum wage would be 29 years old or younger. And those workers who would get a higher salary either directly or indirectly from a minimum wage hike have an estimated 1.17 million children.
Erika Zucker, policy advocate at the Workplace Justice Project, Loyola University Law School, said a higher minimum wage would have a bigger impact on Louisiana than in more well-to-do states.
“What a wage increase, particularly to the lowest-paid workers, does is it has an almost exponential effect on their standard of living,” she said.
Many minimum-wage workers have to hold down more than one job just to pay for their rent, bills, transportation and child care, Zucker said. A raise could allow those workers to spend more time with their families, and it would increase the amount of money spent in the community.
“If you give people at the bottom a little more disposable income, they’re going to be able to go out and spend it on things they wouldn’t otherwise be able to afford,” Zucker said.
Not just for food and shelter, but going to movies, buying a pair of shoes. A raise of $2 or $3 an hour might not make that big a difference to most people, but it’s substantial for those living at or near poverty level.
Increasing the minimum wage has met so much resistance because it requires businesses, many of them very large, to give workers a raise, she said. It does cost businesses money.
“But we’re talking in many cases about some of the most profitable companies in this state,” she said, pointing to giant retailers such as Wal-Mart and Target.
Moller said what’s usually lost in the minimum wage debate is that higher wages would generate more jobs than would be lost as employers eliminate positions to cut costs.
But Loren Scott, a retired LSU economics professor, said raising the minimum wage would cause businesses to reduce the number of workers. After all, the rule of supply and demand dictates if the price of something goes up, people buy less of it — whether it is labor or goods.
“You’ll have fewer people employed and primarily it will be teenagers,” Scott said. “At the very time in their lives when they should be off the street and learning things like the importance of showing up for work, how to work for someone — even if they’re a jerk — and how to get along with customers.”
Meanwhile, the president’s order is expected to affect 3 percent of federal contract workers, according to the National Federal Contractors Association, which represents small businesses.
Alex Hernandez, owner of New Orleans-based Hernandez Consulting which does work for the government, said raising the minimum wage won’t really affect his company.
He employs about 40 people, all of whom make more than $10 an hour. The company provides project management, construction, design, environmental design, sustainability and security services to the government sector.
“You can’t really hire anyone for less than $10,” Hernandez said. “Especially in New Orleans post-Katrina … even for the most basic day laborer to literally just do clean-up or dig a ditch, the most common laborer, you can’t hire for less than $10 an hour anyway,” Hernandez said.
In places like Alexandria or Shreveport, some federal contractors with work may pay less than $10 per hour, but Hernandez said even in those cities his pay is higher.
“I think where you’re going to see it is the McDonald’s and the pizza places of the world, the Domino’s pizzas, where people probably make $7.50 an hour, those wages are going to go up,” Hernandez said, “which means that pizza prices are going to go up.”
A spokeswoman for Raising Cane’s, of Baton Rouge, said the fast-food chain has yet to determine the impact of an increased minimum wage.
The leisure and hospitality industry is the sector with the highest proportion of workers at or below the current minimum wage nationally, about 19 percent, the federal Bureau of Labor Statistics says in its report.
That’s a big industry in Louisiana with about 217,800 workers, or 11 percent of the state’s workforce in November.
“Most hotel positions are already above minimum wage, so it will not affect us too much. We may have to adjust a few entry-level wages if they are close to the new minimum wage,” said Ralph Ney, general manager of the Embassy Suites in Baton Rouge. “I suspect all other business affected would have to pass on payroll increases to the consumer.”
According to state Civil Service, there are 190 rank-and-file state employees who make minimum wage. Most of them are custodians and laborers. Others are food specialists and nursing unit and psychiatric aides.
Joseph Donchess, executive director of the Louisiana Nursing Home Association, said a nursing home that has a contract to care for Veterans Affairs patients might be affected by the increase being ordered by Obama for federal contractors, but it’s unclear now.
“I think most of our nursing aides start out at $8.50 or $9 an hour … but that may be lower in some rural nursing homes,” Donchess said.
As aides gather experience, the pay rate varies by nursing home owners, he added.
Sarah Covert, who owns Sarah the Pet Sitter in New Orleans, said she’s already paying her five employees $10 an hour. Covert, who started the business in November 2010 after working for non-profits and social justice organizations, said she wants to pay her workers as much as she can.
Paying workers well above the current minimum wage has paid off, Covert said. “I get better employees and they provide better service,” she said. That’s important in a business that involves going into people’s homes and looking after their pets. By providing the extra quality of service, that allows Covert to charge customers a little more.