Privacy Added as Wage Issue

Cincinnati Enquirer - October 9, 2006
   

Ballot amendment would raise low pay
By Jon Newberry

Cincinnati Enquirer

A proposed Ohio constitutional amendment to hike the state’s minimum wage from $5.15 an hour to $6.85 has supporters and opponents battling over privacy issues as well as money.

Many opponents contend the measure will hurt working people more than it will help them – and say a bigger issue is the threat they claim it poses to privacy.

In addition to increasing the minimum wage for roughly 5 percent of the state’s 5.6 million workers, the proposal contains other provisions that require employers to:

Maintain complete pay records for all employees from date of employment through at least three years after they leave.

Provide free copies of those records to any employee or “person acting on behalf of an employee.”

Jim Mundt, regional director of White Castle operations in Greater Cincinnati, said the proposal doesn’t set any limits on the number of times someone could request pay records and that the recordkeeping requirements would apply to all employees, not just hourly employees.

“We see this as a way for union organizers to get a lot of information that they don’t have access to now,” he said, calling it “an invasion of privacy bill masquerading as a minimum wage bill.”

Supporters call those claims overblown. They focus on the economic benefit that they say poor working people would get from a higher wage.

“It’s a start. It’ll bring them up some,” said Doug Sizemore, a member of the Machinists Union and the executive board of the Cincinnati AFL-CIO. “It’s the right thing to do.”

He thinks the constitutional amendment is needed in Ohio because the federal government and the state legislature haven’t done enough to help working people. The federal minimum wage of $5.15 hasn’t been increased in nine years, Sizemore notes.

The amendment also would require the minimum wage to be automatically adjusted every year, based on changes in the cost of living beginning in 2008.

Columbus-based Ohioans for a Fair Minimum Wage, which supports the amendment, counters the privacy charges by saying similar provisions in nine other states have not led to invasions of privacy.

The amendment only gives someone a right to inspect his or her own payroll records – and anyone else who wanted access would have to have that employee’s consent, it said.

The group also said the proposal doesn’t impose any new requirements on employers, who already must maintain similar records under federal law.

320,000 AFFECTED

Privacy issues aside, the impact of the proposed wage hike is also a matter of disagreement, although both sides more or less agree on the number of people who would be directly affected by the measure because they now make less than $6.85 an hour.

A study by Florida State University economist David Macpherson concluded that the hike would directly affect about 320,000
employees, 63 percent of whom are aged 24 or younger. His study was conducted for the Employment Policies Institute, which opposes the measure.

The AFL-CIO, which supports the proposal, says 297,000 Ohio workers would be directly affected.

Amy Hanauer, executive director of Cleveland-based think tank Policy Matters Ohio, noted that more than 400,000 additional Ohio workers would indirectly benefit because they now make somewhat more than $6.85 and will likely get raises if the minimum-wage hike passes.

More than half of all affected workers live in the poorest 40 percent of households, she said. “It’s a relatively well-targeted way of dealing with low incomes,” she said.

She and other proponents also say states with higher minimum wages create more small businesses and small-business jobs.

BUSINESS EXPENSES

Meanwhile, many business people – but not all – oppose the measure because say it would drive up their costs.

Frisch’s Restaurants Inc. has made a rough calculation that its overall pretax expenses in Ohio would increase by $3 million a year if the minimum wage amendment passes, said Don Walker, the company’s chief financial officer.

“The only thing that you could do, if that goes through, I’m sure everybody would raise their prices,” he said.

And it could lead to fewer jobs, he said. “We would have to look at, what does this do to our economic model … if you can’t recoup it with a price increase.”

Walker pointed out that the minimum wage for servers, who wait on tables and rely on tips for most of their pay, is now $2.13 an hour. Under the proposed amendment, it would increase to half of the new minimum, or $3.43. Since Frisch’s typically pays the minimum wage for servers, that’s a direct increase in its expenses of $1.30 for every hour worked, plus higher company expenses for Social Security and Medicare.

Lorrie Paul Crum, vice president of corporate communications at Sandusky-based Cedar Fair LP, which bought Kings Island earlier this year, said a minimum wage hike would increase its costs but wouldn’t result in job cuts.

“Our priority is going to remain the same,” she said, citing safety and customers’ enjoyment of its parks as its top concerns.

“Is it going to devastate us? Absolutely not. Is it going to cost us more? Yes, absolutely it will.”

WHO BEARS THE COST?

Steve Cobb, an economist at Xavier University, said the effect of a higher minimum wage could be fewer jobs, increased prices or lower profits, depending on the circumstances of individual businesses and how much the added wage expense raises their total expenses.

If it’s a small fraction of overall expenses, a company might be able to absorb the added cost.

But if a company employs a lot of unskilled labor – as is common for retailers and fast-food chains – it would have to react in some way.

“That ultimately determines who bears the cost,” Cobb said.

How a company reacts also depends on its competitive situation, including alternative options for customers.

Some companies in Southwest Ohio, for example, might have trouble raising prices if customers can instead go to Northern Kentucky or Southeast Indiana, where the minimum wage would remain $5.15. In that situation, companies would probably have to either reduce jobs, accept lower margins, or fold, Cobb said.

A STARTING POINT

At White Castle, where the base starting pay is $6.75 and the average wage is $10 plus more than $4.50 in benefits, Mundt sees the issue differently.

“Everybody feels good about raising the minimum wage,” he said. “But it’s a starting point … for people with little or no skills and no record of reliability.”

White Castle hasn’t been able to hire qualified workers at minimum wage for at least 30 years, he said.

When the minimum wage goes up, everyone else expects a raise too, he said. The end result is higher prices.

Or fewer jobs.

“That’s the first thing you’d try to (cut), in order to hold prices down,” he said.

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