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Bills rekindle discussions about minimum-wage increases

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Linda Grove bought her first Subway franchise in York in 1991. She eventually owned four restaurants in the city and neighboring West York.

Life as a small-business owner was not glamorous by any standard. She worked long hours for not much profit beyond servicing the debt she held.

The minimum wage during her time as a franchise owner — she sold her last Subway in 2010 — roughly doubled to $7.25 from $3.80.

Grove saw the positives and negatives on both sides of the minimum wage issue. She usually started employees at the minimum, but mainly because many of them didn't stay long.

"We could see right away if they were going to stick," said Grove, a government marketing specialist for the Kutztown Small Business Development Center office in York. "Then you could move them up quickly."

Minimum wage is again a big news item at both the state and federal levels, with progressives pushing wage-increase bills on both stages. At the federal level, President Barack Obama is among those backing an increase to $10.10. In Pennsylvania, Sens. Daylin Leach and Mike Stack seek to raise the state minimum wage to $12 an hour and also to kill the sub-minimum wage for employees who receive tips.

The question of who pays minimum wage is difficult to answer. The fast-food industry and restaurant employees are most likely to be paid $7.25, according to data by the state Department of Labor & Industry.

Grove agrees that the minimum wage is not a livable wage, but she said market forces are pushing Central Pennsylvania wages higher. She cites her time as a small-business owner as an example.

In order to retain quality employees and avoid costly retraining time, Grove quickly identified workers willing to "stick" and boosted their pay. She also gave her employees vacation time and health insurance, even the part-time workers.

"That's very unusual for fast food," Grove said. "But we decided we wanted to see our families. ... Because you really do work 24-7 if you run a restaurant."

Making a go of it was a constant juggling act for Grove. She had to balance the cost of paying workers better through wages and benefits against the potential loss of business by having untrained workers and constant turnover.

Often, you get only one chance to secure a regular customer, Grove said, and inexperienced or missing employees during a lunchtime rush is bad for business.

"Working at a restaurant is hard work," she said. "We always strove for a really high level of fast service."

The fast-food industry was targeted by low-pay critics last year when strikes, backed by organized labor, were carried out nationwide.

"The majority of these workers are adults," said Richard Bloomingdale, Pennsylvania AFL-CIO president. "They are trying eke out a living on low wages. Many of them are working two or three jobs. They are employed by some of the largest, most profitable corporations on the planet."

Food/drink servers

According to Labor & Industry data, the percentage of minimum-wage Pennsylvania workers in food service and bars increased from more than 34 percent to almost 58 percent from 2008 to 2013.

While the first part of Bloomingdale's statement might be true, the second part is debatable.

Overall, the restaurant industry is a low-margin business that doesn't have much profit to spare. The average profit margin for the entire industry is 2.4 percent, according to S&P Capital IQ, a company specializing in financial market research. That figure is down from 3.2 percent in 2009.

"Because of the waste, because it's labor intensive, it's really tough to compete," Grove said. "Even though we understand that we can't live on this wage, the restaurant owners also can't stay in business."

In a recent opinion piece supporting his legislation, Leach pointed to federal Bureau of Labor Statistics data showing that "historically increases in the minimum wage do not cause significant job loss."

Leach argued that the market corrects itself each time the minimum wage is raised, and, if the decision were left to pro-business forces, workers would never get a raise.

Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry, said that logic ignores reality.

"If we make that person more expensive to hire, do you think we're going to get more of those people hired by raising the wage?" he asked. "The money has to come from somewhere. It's not free money printed in a basement somewhere."

Wages should be left to market forces, Barr said, adding that wages are already increasing in the Marcellus Shale areas due to lack of labor.

"One of the reasons we oppose this is it hurts the people it's designed to help," he said. "It's a tremendously inefficient way to help the people it's designed to help."

Study: 5.5 percent of Pa. residents earn minimum wage or less

The state Department of Labor & Industry tracks what employees earn using a variety of sources.

In its most recent data, which covers 2013, there were 190,800 Pennsylvania workers earning minimum wage or less, which was 3,700 (1.9 percent) lower than the 2012 level. The decrease was due to a decrease of 12,400 in those earning below the minimum wage, while the number of those earning exactly the minimum wage ($7.25 per hour) increased by about 8,700.

Here are a few other interesting facts about minimum wage from the Analysis of the Pennsylvania Minimum Wage in 2013, which was released by the department in March:

• Nearly 80 percent of hourly workers earned more than $2 an hour above the minimum wage (above $9.25), and 5.5 percent earned the minimum wage or below. These figures compare with 76.8 percent and 4.3 percent, respectively, for the U.S.

• In both Pennsylvania and the U.S., the proportion of hourly workers who earned at or below the minimum wage decreased slightly, while that of those earning “near the minimum wage” (exceeding it by $2 or less) decreased by a greater percentage, and the proportion of those earning at least $2 more than the minimum wage increased.

• The household income of those who earned the minimum wage or below varied greatly. Fifty-nine percent of such households earned less than $50,000 per year, and 34 percent made less than $30,000 per year. In contrast, 28 percent had annual household incomes of $75,000 or more a year, and 18 percent made $100,000 or more per year.

• In Pennsylvania, the industries most likely to employ workers at or below the minimum wage were food services and drinking places, retail trade and educational services. These industries employed more than 74 percent of all minimum-wage earners in 2013, with food services and drinking places accounting for almost 58 percent.

In 2013, almost 66 percent of hourly paid workers earning the minimum wage or less worked part time.

• The percentage of minimum-wage workers in food service and drinking places increased from more than 34 percent to almost 58 percent from 2008 to 2013.

• In 2012, the full-time annual income for an individual in Pennsylvania making the minimum wage ($7.25) was $15,080, or 101 percent of the 2012 federal poverty threshold for a two-person household ($14,937).

• The number of minimum-wage workers fell by 71,800 (27.3 percent) from 2008 to 2013 in Pennsylvania. Over this period, total employment fell by 1.1 percent, while the number of those paid an hourly rate increased by 0.4 percent.

Source: Analysis of the PA. Minimum Wage in 2013 (Pennsylvania Department of Labor & Industry)

John Hilton

John Hilton

John Hilton covers Cumberland County, manufacturing, distribution, transportation and logistics. Have a tip or question for him? Email him at johnh@cpbj.com. Follow him on Twitter, @JHilton32. Circle John Hilton on .

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