Business may hold down hiring to offset hike in minimum wage

By Repps Hudson
ST. LOUIS POST-DISPATCH
Thursday, Nov. 09 2006

A 26 percent increase in Missouri's minimum wage to $6.50 an hour will hit
urban and rural workers hardest because some may lose their jobs or not be
hired as businesses adjust to hold down costs, some business owners and
analysts say.

But most of Missouri's hourly wage-earners will not be affected directly, those
observers say, because they already are paid more than the present minimum of
$5.15 an hour.

And those who keep their jobs at the higher hourly wage will have more money to
spend.

"It's not all good, and it's not all bad," said Pat Welch, professor of
economics at St. Louis University's Cook School of Business. "Certainly, some
businesses will be hurt. But in areas like St. Louis, it could help individual
households, which would also help small businesses."

By 76 percent, Missouri voters on Tuesday endorsed the first hike in the
minimum hourly wage since 1997, when the federal rate last changed.

The increase puts the Show-Me state on par with Illinois, but higher than its
seven other neighboring states. With the exception of Arkansas' $6.25, the
other states are in line with the federal standard of $5.15.

"In Kansas City, they will lose business to Kansas, where the wage is very
low," said Ken Troske, professor of economics at the University of Kentucky and
co-author of a study on the law's potential impact.

But what concerns wage-hike opponents is the annual adjustment for inflation.

Critics of the new statute say that feature could possibly make Missouri
uncompetitive for the restaurants, nursing homes and other businesses that hire
employees at minimum wage.

Brad Jones, executive director of the Missouri chapter of the National
Federation of Independent Business, wants the state Legislature to remove that
clause when it meets next year. Because the new measure is a statute, not a
constitutional amendment, the Legislature can change it.

"We are going to talk to the Senate and House leaders to see if we can get them
to take out the indexing," he said.

That could be a risky political move, even for the pro-business,
Republican-controlled Legislature elected Tuesday, said Nancy Cross, vice
president of Local No. 1 of the Service Employees International Union, which
strongly backed the issue and the inflation clause.

"If I were them, I'd think again about taking that out," said Cross, noting
that voters in every county passed the measure.

Troske said his study showed that about 200,000 workers in Missouri earned
between $5.15 and $6.50 an hour, so raising the legal wage probably will not
affect too many people. About 1.6 million workers in Missouri are paid on an
hourly basis.

Rick Duree, co-owner of the Book-X-Change college bookstore near Lindenwood
University in St. Charles, pays above the minimum wage, so he technically won't
affected.

But he still expects to increase eventually his employees' wages to keep that
differential from shrinking.

Because of the higher wages, Duree plans to hire one less employee when he
opens a new bookstore in Columbia, Mo.

Others worry that the higher wage will make it more expensive for them to try
out unskilled workers.

"I get young men from high school who have never worked before. A lot of them
were not in structured families," said Forrest Miller, co-owner of Giuseppe's
Ristorante at 4141 South Grand Boulevard. "They have very little experience
with rules and regulations. I need to see if they can work well." He puts new
employees on probation at the minimum of $5.15 an hour when they work in the
kitchen or in jobs other than serving, where they may earn tips.

Still, not all businesses opposed the change. Scott Eirich, owner of Eirich
Landscaping Inc., in Affton, was happy to see the minimum about to go up.

"I think it's a good thing. I'm grateful the little people will get a little
more," said Eirich, who added that, in his business, minimum-wage workers
generally are not reliable. "I think most companies are above the minimum wage
if they want someone who's valuable to them."

CHRISTOPHER BOYCE CONTRIBUTED TO THIS REPORT

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