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Some local business don't want wage hike

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Higher minimum wage would cost business owners, as well as customers, some say

By Calen McKinney

 

A bill that would eventually raise the state's minimum wage to more than $10 an hour is nearing approval from state legislators. But locally, the bill doesn't seem to have many supporters.

Several local business owners say they believe the increase in wages would force them to raise prices to recoup the higher costs they will have to pay.

House Bill 1, sponsored by State Rep. Greg Stumbo, D-Prestonburg, who also serves as Speaker of the House, has passed a Labor & Industry Committee and now goes to the full House for consideration.

Current minimum wage is $7.25 an hour. The bill calls for that to increase to $8.10 an hour in July, to $9.15 an hour by July 1, 2015, and to $10.10 an hour on July 1, 2016.

If approved, the increase will be the first to the minimum wage rate since 2009.

The bill was introduced on Jan. 7. Committee members gave their OK to the measure on Jan. 31 and it was headed to the full House on Monday. Rather than approve the measure, however, another amendment was filed to it.

The bill passed the House on Thursday by a vote of 54-44. State Rep. John "Bam" Carney, R-Campbellsville, cast one of the 44 "no" votes.

According to a Legislative Research Commission news release, the bill also proposes a prohibition on wage discrimination, stating that Kentucky workers be paid equal wages for equal work, regardless of sex, race or national origin.

The bill doesn't include an increase in wages for employees who receive tips. Nevertheless, according to the LRC, House Bill 191, sponsored by State Rep. Will Coursey, D-Benton, calls for an increase in those wages from $2.13 an hour to $3. That bill has also passed a House committee and now awaits discussion in the House chambers.

Stumbo has said that nearly 391,000 working Kentuckians earn less than $10.10 an hour, which includes the parents of an average of one in five Kentucky children.

The current minimum wage equates to about $15,080 in gross pay each year. His bill, he has said, will increase that to $16,209 a year.

"This is about the people who are earning the absolute lowest wage that a citizen ... can make," he said.

If approved, according to the LRC, Kentucky would become one of 21 states and the District of Columbia that have a minimum wage higher than the federal minimum wage, which also stands at $7.25 an hour.

Several local restaurant managers and Taylor County's senator and representative say they are against raising minimum wage.

Carney told constituents last month during a legislative forum that the majority of those who work minimum wage jobs are high school and college students.

"I wish everyone could make more money in their job. But I'm opposed to mandating it," he said. "It's not intended to be a living wage. It's intended to be a support."

If minimum wage is increased, Carney said, he believes businesses will increase the cost of their services or have to get rid of jobs.

State Sen. Sara Beth Gregory, R-Monticello, said on Tuesday that she believes it's more important to focus on creating jobs than raising minimum wage.

"One concern about raising the minimum wage is that it will eliminate existing jobs and stifle economic growth," she stated in an emailed response.

"Studies show that increasing the minimum wage actually increases unemployment. Numerous local employers have already contacted me to share that they would have to reduce their employees if this bill passes."

She said it's hard to know the overall financial impact of raising the minimum wage, but legislators know that it could cost local governments as much as $5 million a year.

Other concerns about Stumbo's bill, Gregory said, are that raising minimum wage to higher than neighboring states could deter new business in Kentucky, and that an increase in salary costs will simply be passed on to consumers. And many local managers say that could likely be the case.

Chasity Beckley, general manager at Sonic, said her employees, who all start out making minimum wage, work less than 30 hours a week. During peak season when more employees are working, Beckley said, and an increase in minimum wage will mean she will be out more.

"It's gonna be like a lose-lose situation for me," she said.

But if state officials relaxed their employee insurance regulations, she said, the increase in minimum wage might not sting as much.

Cindy Spencer, assistant manager at Subway in Green River Plaza, said all her employees make minimum wage.

"I'm sure it will hurt a little," she said. "But then again you're gonna get more out of your employees, too."

Spencer said she doesn't anticipate that Subway's prices would increase as a result of a higher minimum wage.

Sheila Parker, general manager at Subway on East Broadway, said the increase could mean she has to consider cutting a few positions.

"If not selling the business," she said. "If you want to make any profit, what's the point with messing with the headache?"

However, Parker said she doesn't believe those who have minimum wage paying jobs intend for them to be their permanent careers.

David Alan Newton, owner of Lee's Famous Recipe, said that while his employees make more than minimum wage, the increase will still impact him.

"We base our labor on sales," he said.

And anytime the cost of labor increases, the percentage of profits used to pay that cost also increases. Newton said he predicts that a higher minimum wage will mean higher prices at Lee's.

"The customers get penalized," he said. "If we're paying it all out in labor, it's gonna hurt the business owner's take home pay."

Managers at several other businesses referred comment on the increase to corporate office representatives. Several others declined to comment for this story.

Carney and Gregory have said they want to hear how residents feel about issues being discussed during this legislative session.

Carney can be reached at 465-5400 or john.carney@lrc.ky.gov. To contact Gregory, call (800) 372-7181 or email sara.gregory@lrc.ky.gov.