Waging War on the Minimum

Cincinnati City Beat - September 20, 2006
   

A matter of fairness or a plot against privacy?
By Margo Pierce

Cincinnati City Beat

An increased minimum wage will hurt businesses or help Ohio’s economy and the working poor — it just depends on the speaker and which study you read. Both sides say the other is creating a smoke screen for larger issues.

The Ohio Legislature just raised the state’s minimum wage from $4.25 an hour, where it was set in 1991, to the federal minimum wage of $5.15 an hour. Many speculate that it was an attempt to prevent a ballot initiative this fall. The attempt failed.

A petition drive collected more than 600,000 signatures statewide when only 322,000 were needed to put the constitutional amendment before voters. Raise the Wage: Ohioans for a Fair Minimum Wage provides a list of reasons for casting a “yes” vote on this issues in November.

“After 10 years of Congress ignoring raising the minimum wage to the point where, in real dollars, the purchasing power of the minimum wage rate is at a 50-year low,” says Tim Burga, director of government relations for the AFL-CIO of Ohio (www.ohaflcio.org).

A raise isn’t enough
That seems like a sound reason for the proposed increase to $6.85 per hour effective Jan. 1, 2007 and tying future increases to the rate of inflation, “according to the Consumer Price Index or its successor index for all urban wage earners and clerical workers rounded to nearest five cents.” This wage would apply to small employers, some farms and most restaurants. Workers employed by larger enterprises are generally covered by the federal minimum wage.

Even at $6.85 an hour, a worker will still make only $13,700; the official 2006 federal poverty level for a family of three is $16,600.

“Common sense would tell us that, if someone at the lowest rung of the economic ladder gets a raise, they don’t really have the means or wherewithal to invest it or put it in a (certificate of deposit),” Burga says. “They’re going to spend it on mainstream businesses. That’s just the reality of it, and that’s going to stimulate the economy.”

Does this mean it makes sense to raise the minimum wage?

“The people who are already working tend to be low-wage workers,” says George Vredeveld, director of the Economics Center for Education and Research at the University of Cincinnati. “They are going to favor minimum wages because, by law, they would like to see these wages increase so that they don’t have to compete with lower waged workers. On the other hand, the employer will tend to not to want to pay the higher wages if they don’t have to.”

Payroll increases affect businesses, but quantifying that effect can be difficult. A study done by Florida State University suggests that, by raising the minimum wage, Ohio can expect to lose 12,000 jobs and take a $308 million dollar hit to the state’s economy.

An opposing study by Policy Matters suggests that states with a higher minimum wage experience a growth of small business, and small business payrolls increase faster than businesses in states with a lower minimum wage.

Vredeveld doesn’t believe small business growth is directly linked to the minimum wage because other factors such as inflation, competition and even weather can have an impact on the health of a small business.

“There are some people who will lose their jobs because the employer will say, ‘This person is worth $5.50 an hour, but not $7.00 an hour.’ Logically it makes sense, and in reality it’s borne out,” Vredeveld says. “What you’ve got in a situation like this is the people who keep their jobs … benefit dramatically. Those who don’t keep their jobs go from whatever wage they were earning to zero, and that’s a big hit.”

He doesn’t believe a minimum wage is an effective way to address poverty.

“You’ve got to develop what economists call the human capital,” Vredeveld says. “That is knowledge and skills and attitudes that allow these people to be effective in the work place. Now we’re talking about an education, job-training program.”

Burga agrees, sort of.

“Job skill training is also important, but the two are not mutually exclusive,” he says.

Privacy concerns
But discussion about how to address the needs of the poor pulls attention away from the fine print of the proposed constitutional amendment. The minimum wage isn’t what matters most about this vote, according to an opposition group, Ohioans to Protect Personal Privacy OTPPP.

“Only a small portion of this proposal is related to the minimum wage issue,” says John McGough, campaign manager for OTPPP. “The majority of this proposal relates to record-keeping and access to employee records. Proponents will say it’s just administerial-type language, but it’s a record keeping requirement, regardless of whether you have minimum-wage employees or not.

“It requires an actual name, address, phone number and hours worked each day and it doesn’t exempt out salaried employees. It creates a whole host of questions about where these records end up in the public domain. Part of the problem is what it all means is unclear and will likely lead to years of litigation to figure it out.”

Employers will be required to make this information available on demand at their own expense as many times and to as many people who request it. Who is permitted to have access to this information is also unclear because the language is so vague, McGough says.

“I say, ‘Smoke screen strategy,’ ” Burga counters. “They can’t attack the wage rate, they can’t attack the worker, they don’t want the minimum wage to go up, so they’re trying to fabricate some nonsense.

“The idea here simply is that, if you feel you aren’t being compensated correctly, you don’t have to go through an extensive process to get the records if your employer doesn’t want to cooperate. So this business of going in and getting anyone’s records is nothing more than a smoke screen. If an employee goes to his or her union steward and says, ‘I would like to see my time records, payroll records,’ what’s wrong with that?”

Burga says it’s a simple matter of looking at reality.

“If you look at all of the economic conditions in the state of Ohio — wages down, jobs down, home foreclosures and personal bankruptcies up, young people leaving the state looking for better opportunities — we have got to send the message once again that we value work in Ohio.” ©

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