Raise to $15 per hour minimum wage would have local effects

By Michelle Price
UCBJ Managing Editor

COOKEVILLE – To many people, the proposed $15 per hour minimum wage sounds like a great idea, but 78% of the businesspeople responding to UCBJ’s survey feel that their business would be hurt by the proposed legislation. In fact, the effects of the wage increase would be far reaching from workforce reductions to price increases and even a raise in the property tax rate.

If enacted at the end of March 2021, the Raise the Wage Act of 2021 (S. 53, as introduced on Jan. 26, 2021) would raise the federal minimum wage, in annual increments, to $15 per hour by June 2025 and then adjust it to increase at the same rate as median hourly wages.  

Raising the federal minimum wage to $15 an hour by 2025 would increase wages for at least 17 million people, but also put 1.4 million Americans out of work, according to a study by the Congressional Budget Office

The owner of one local fast food restaurant agreed to talk with the UCBJ on the condition of anonymity. He said the impact of a $15 minimum wage would be pretty severe on the business and his employees. 

“You are doubling minimum wage now,” said the owner. “In order for us to make the percentage that we have to make to continue, we will have to go up on the prices also. It’s kind of the deal where we are going to pass it on to the consumer. Then, we’ll have to make adjustments at that time to see what we can cut back on. We’ll have to take a little less on our end.”

The business owner said that he anticipates the prices of food in restaurants to almost double as a result of the wage increase.

“Where I get $2 for a soft drink, it will probably be $3 or $4 for a soft drink,” said the owner. “I still have to make my percentages. And my parent company – I have to pay them a percentage every month no matter whether I make anything or my employees make anything. Whatever my total sales are, I have to pay them a royalty fee according to that. They (corporate) are going to get theirs whether I make anything or not, so it could impact us really, really big. I think it’s going to hurt the whole economy.”

The CBO report states that “the largest price increases, relative to the average increase, would be for goods or services whose production required a larger-than-average share of low-wage work, such as food prepared in restaurants.” 

“Prices will increase so much that they will slow down business,” said the owner. “If business slows, the number of part time employees will decrease, and full-time workers will be spread out to cover hours.”

Of the business owners who responded to the UCBJ survey, 63% said that they would be forced to pass higher costs on to customers as a result of the wage increase. Another 27% said that it would force them to reduce their workforce. 

The fast food owner worries that in many businesses the ones to be downsized will be the older workers who are working to supplement their retirement and social security, which wouldn’t increase proportionately to the minimum wage.  

“You go into a lot of places and see senior citizens working. They aren’t doing it because they want to; they are doing it because they have to just to make enough money to live,” said the owner. “I think it will get worse because a lot of businesses will look at it as can this employee do what this employee does, and they will lay the older person off. I think they will be some of the first persons that will be (downsized).”

The effects of the wage increase won’t only be felt in price increases, a property tax increase affecting all property owners would be required also.

Putnam County has 77 salaried employees who currently make below the $15 per hour wage. These are typically entry level positions for each department. 

The total yearly cost to bring these employees to the $15 hourly rate would be $230,490. At the current penny rate of $166,803, it would require a 1.5 cent increase in the property tax, raising the property tax on a $200,000 home by $8 per year.

UCBJ wants to know if the $15 minimum wage is enacted into law, how would this impact your business? UCBJ encourages you to complete a brief survey to share your thoughts. The survey is available on the UCBJ homepage.

Michelle Price is the managing editor of the Upper Cumberland Business Journal and can be reached via email. Send an email.

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