LIMA — Area business leaders fear job losses and that inflation would rear its ugly head if the federal minimum wage goes to $15 by 2025 even though local economics professors don’t believe it will cause significant harm to the economy.
The proposed increase to $15 that Congress is considering would be done in increments, not all at once.
“You know, 2.1% of the population earns the minimum wage. So this might take it up to 4%,” said David McClough, an economics professor at Ohio Northern University. “You have to consider that the wage goes up for quite a few people, but there will be a lot of jobs that are eliminated, and firms just will be much slower to hire people. So that’ll dampen any kind of inflationary effect, due to the fact that the firms are going to incur the cost long before they realize any of the revenue. So it’ll probably offset or slow any potential inflation, but I wouldn’t expect any to begin with. There’s no inflation in our economy.”
A new report by the Economic Policy Institute contends that the $15 minimum wage would save $13.4 billion to $30 billion in taxpayer revenue annually. It would also increase Federal Insurance Contributions Act revenue by between $7 billion and $13.9 billion.
Still, most of the local business owners The Lima News spoke with held onto the conventional wisdom about the minimum wage from years ago.
“To me, anytime you increase wages without a corresponding increase in productivity, you’re just basically creating inflation. So that’s my take on it,” said Carl Berger, president of Superior Wholesale Distributors. “If we’re paying $18 and the minimum wage is $15, many of your workers will expect more. Certainly, the people who are paying that wage are going to have to increase their prices and that makes everybody else’s money worth less.”
McClough doesn’t believe business owners will increase the salaries of everybody they employ, just because their lowest-paid workers received a raise.
“I can’t imagine that firms will uniformly respond to that with proportionately higher wages — it’s just too expensive and unprofitable and threatening to their business,” McClough said.
Tracie Sanchez, owner of the Lima Pallet Company, feels she won’t have any choice but to raise salaries.
“We do have to pay or we’re gonna lose good people,” Sanchez said. “There’s not one business owner, that’s going to say I’m paying my top people $15, $18 $20 an hour, and now I’m paying my minimum wage at $15. You think those people are gonna work at $15 or $18 and $20 an hour? No, they’re gonna expect raises, they’re gonna look at us like, what the heck, if minimum wage is $15, they’re gonna expect more and we’ll have to pay them.”
Sanchez admits she does pay some of her employees minimum wage.
“If this minimum wage goes up to $15 an hour, I will not be hiring summer help college students, or high school students, which is a shame — or the disabled,” Sanchez said.
While the crew member at McDonald’s would love to earn $15 an hour, it’s unlikely consumers will want to pay a whole lot more for a Big Mac.
“Everything will go up. So instead of going to McDonald’s and spending $5 for lunch, it’s going to go up accordingly because the workers at McDonald’s are going to be getting a raise,” said Drew Fields, president of Innovative Packaging.
One area of concern is the entry-level minimum wage jobs suddenly become more attractive to more experienced workers who are looking for something easier.
“If I’m (working) at Rudolph foods at $17 an hour and everybody else just got a $3 raise that was working at minimum wage, now there’s only a $2 differential. Am I going to go do the easier job or am I going to stay at the harder job for $17?” asked Joe Patton, director of Ohio Means Jobs Allen County.
Patton contends a $15 minimum wage will shut out the kid in high school trying to land his first job.
“We work with a lot of youth, and we’re helping them get into their first job, A first-job skill level person is not worth $15 an hour to an employer. So if I’m hiring a kid, it’s kind of a learning-the-ropes thing. And what I’m afraid is it’s going to stifle the kind of growing in an occupation or encouraging young people to work or get first part-time jobs,” Patton said.
In 1993 economists Alan Krueger and David Card surveyed the impact a minimum wage hike had in New Jersey and eastern Pennsylvania. New Jersey had just raised their minimum wage but Pennsylvania did not. They found that economic growth was not slower in New Jersey after the minimum wage was raised. They published a book on their findings which is available on Amazon. It’s called “Myth and Measurement: The New Economics of the Minimum Wage-Twentieth-Anniversary Edition.”
Wages have gone up naturally over the past three or four years with plenty of opportunities for people to make much more than the minimum wage.
“Lima is a very interesting place where someone with no education, drug-free, shows up to work on time, can make big dollars at the refinery, at the tank plant. All they have to do is show up and not do drugs,” Fields said.
Reach Sam Shriver at 567-242-0409.