Nebraskans weigh potential minimum wage increase

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Posted: Sunday, March 3, 2013 12:00 am

With a pen taped to a plastic spoon, Amanda Cooperrider applied for assistance at the Heartland Hope Mission, one of more than 200 people who came out on a snowy Tuesday evening for help feeding themselves and their families.

Cooperrider, 27, praised President Barack Obama's proposal to raise the federal minimum wage to $9 per hour, saying it would help Nebraska families like hers. Cooperrider said her husband earns $7.50 an hour as a janitor and she doesn't work because of a disability, and the couple have been squeezed by rising food and gas prices.

“We have no money at the end of the month,” said Cooperrider, who selected shampoo, pasta, peaches, canned chicken and a box of Life cereal at the pantry. “The only thing that hasn't gone up is the wages,” she said. “Wages have stayed the same for years.”

Polls show economists generally support the proposal, but they also caution that it could increase unemployment for the youngest and least-skilled workers. Business groups say the retail and hospitality sectors especially could be forced to cut back on hiring or raise prices to make up for an increase in wages. Even some workers who would directly benefit worry about what an increase would do to prices and jobs.

As with Cooperrider's husband, few low-wage Nebraskans earn exactly the $7.25 minimum wage. About one in 20 hourly workers earns $7.25 per hour or less because of some exceptions in the law. It's about 32,000 people in Nebraska's total labor force of just over 1 million people.


But many more would be affected by a bump in the minimum wage.

New research shows 97,000 Nebraskans, nearly 10 percent of the state's labor force, earn up to $9 an hour, making them direct beneficiaries of Obama's proposal. An additional 27,000 who make just over $9 an hour could see their wages rise, too, as employers make adjustments to wage scales based on experience and job skills, according to a new analysis of Bureau of Labor Statistics data by the Economic Policy Institute, a left-leaning Washington, D.C., think tank.

In Iowa, 164,000 people, just over 10 percent of the labor force, make under $9, and 45,000 others make slightly more and would be indirectly affected by a $9 minimum, according to the institute.

“A lot of people don't realize how many people are struggling to get by on such low income levels,” said Economic Policy Institute analyst David Cooper. He also said the often-cited argument that minimum wage earners are mostly teenagers is inaccurate. About half are 25 or older, according to the Bureau of Labor Statistics, although the percentage of workers earning minimum wage is far greater among those under 25.

The federal minimum wage, which is also the minimum in Nebraska and Iowa, last saw a boost when it was raised gradually between 2007 and 2009 to $7.25, up from $5.15.

In his State of the Union address Feb. 12, Obama proposed increasing the federal minimum wage to $9 by 2015, and indexing it to inflation. He also proposed raising the minimum wage for tipped employees, which has been at $2.13 per hour since 1991. Employers must make up the difference if an employee's tips do not total $7.25 an hour.

Jobs paying up to $9 per hour are widely advertised across the Omaha-Council Bluffs metro area. Employers posted want ads in February with starting pay under $9 for a car detailer, bank teller, barista, dining room server, janitor, hair stylist, warehouse production worker, housekeeper, telemarketer, home health aide, customer service representative and bellhop, among others.

Metro-area employers said they rarely pay minimum wage except to the least skilled or youngest workers.

“If they're 16 years old and it's their first job, obviously we're going to pay them minimum wage,” said Alan D'Agosto, whose company, Panda Inc., operates 14 Arby's restaurants in Nebraska and Iowa.

But, he said, “If it's someone that's got a lot of experience and they've got the kind of personality that we want and the work ethic that we want, if we have to pay a little more for them to come, then we will.”

D'Agosto finds that paying more for skilled workers tends to decrease his turnover.

“If we need to pay somebody more to keep them, we will,” he said.

Few, if any, of the 150 employees at the Embassy Suites Omaha in the Old Market earn minimum wage, General Manager Susan Madsen said, even though more than 18 percent of minimum wage earners nationally work in hospitality.

She said her hotel and others in the Omaha market participate in salary surveys in order to remain competitive. Madsen said the hotel's servers, who could be paid as little as $2.13 per hour plus tips, start at $6.50.

Setting the minimum wage at $9 would help employees keep up with the rising cost of living, Madsen said, but it also could cause the hotel to have to cut back in other areas, possibly including a reduction in staff hours.

“You have to make up the profit to your ownership or management company,” Madsen said.

Companies also might respond by hiring fewer workers.

“Employers are going to be cautious and not overhire,” said Hy-Vee Supermarkets spokeswoman Ruth Comer.

Who earns minimum wage or less?

Of all workers who earn an hourly wage:

Ages 16-24: 1.8 million, or 12.1%

25 and older: 1.8 million, or 2.9%

Men: 1.3 million, or 3.4%

Women: 2.3 million, or 6.0%

Full time, or 35+ hours per week: 1.3 million Part time: 2.3 million

Source: Bureau of Labor Statistics, Characteristics of Minimum Wage Workers 2012

With the last minimum wage increase, Comer said, there was hiring “pullback” at first, “as the stores look to get a handle on their labor costs and how to make the most efficient use of their labor force, whether that means hiring additional employees at a higher rate, or making great use of the employees you already have.”

She said wages at Hy-Vee are left up to the discretion of individual store managers, but typically only entry-level grocery workers — such as “courtesy clerks” who bag groceries and retrieve carts — are paid minimum wage. Wages also tend to be higher in urban areas like Omaha than in a smaller town, she said.

With more competition in the retail sector, “If you want to attract the best, you have to pay a little bit better than the market rate,” Comer said.

Still, managers may be reluctant to pay $9 per hour to entry-level workers and may instead give more experienced workers more hours.

“There will end up being fewer opportunities for those 16-year-olds to get their first job,” Comer said.

An increase would mean lower margins at area Burger King restaurants, said Chris Ondrula, president and CEO of Heartland Food Corp., the franchisee for 415 Burger King restaurants, including 51 in the Omaha metro. The firm employs 8,800, most of whom start out at minimum wage.

Ondrula said a wage increase on top of rising health care and commodity costs would accelerate the closing of less-profitable restaurants.

Restaurant managers could reduce staff hours to keep payroll costs even, “but we'll ask fewer people to do more. It unfortunately impacts customer service,” he said.

Ondrula said minimum wage increases from 2007 to 2009 resulted in his restaurants raising prices and hiring fewer entry-level people.

Some studies support the stores' claims.

A 2011 University of Delaware study of the effects of the 2009 minimum wage increase found evidence of a negative effect for young adults with a high school degree or less. University of Chicago economics professor Casey Mulligan found that the number of part-time jobs relative to full-time jobs fell in states affected by the minimum wage hike.

In a recent poll of top economists by the Initiative on Global Markets at the University of Chicago Booth School of Business, most showed support for an increase in the minimum wage, while some cautioned that it could increase unemployment among the least-skilled workers.

However, a recent review of years of minimum wage studies, published in February by the Center for Economic and Policy Research, concluded that the minimum wage has little or no effect on low-wage workers' job prospects overall. That's because there are so many other ways employers adjust, including reducing hours, benefits or training; increasing prices; accepting smaller profits; and cutting pay to other workers.

Higher wages also can reduce turnover, which offers savings to employers.

The study has been cited by proponents of Obama's plan. The Obama administration says increasing the minimum wage would help businesses by putting more spending money in consumers' pockets and reducing turnover.

Business groups object, saying that raising the wage will kill jobs.

Millions affected

Increasing the minimum wage to $9 per hour would directly affect 13.4 million Americans who earned less than that in 2012.

Breakdown: National; Nebraska; Iowa

Earned $7.25 or less: 3.6 million; 32,000; 46,000

Earned $9 or less: 13.4 million; 97,000; 164,000

Earned just over $9: 4.7 million; 27,000; 45,000

Source: Economic Policy Institute

“You don't make labor more expensive and expect small-business owners to hire more people,” said Ron Sedlacek, vice president and general counsel for the Nebraska Chamber of Commerce & Industry.

He said a wage hike would unfairly affect some sectors and the results could include reductions in employee benefits, more mechanization, holding off on capital improvements and cuts to marketing.

When a minimum wage does not rise, over time the percentage of jobs that pay that wage tends to shrink because of inflation. The national percentage of hourly workers who earned minimum wage or less fell in 2012 to 4.7 percent from 5.2 percent in 2011, according to new Bureau of Labor Statistics information released last week. The percentage also fell in Iowa but was up slightly in Nebraska.

In time, the effective starting wage rises above the legal minimum wage.

“$7.25 isn't what it was four years ago,” said University of Nebraska-Lincoln economist Eric Thompson.

That's why it makes sense to index the minimum wage, Thompson said, regardless of whether politicians agree to raise it. The debate over whether to raise it or not becomes distracting from the real decision about where to set the minimum wage, which Thompson said involves thinking carefully about the tradeoffs created.

If the wage is indexed, “Our choice remains intact over time.”

At the food pantry on South 21st Street, the rows of chairs were packed with people like Teri Fairchild, 55, who earns $8 an hour as a child care provider. She was there with her boyfriend and his brother; the three live together, contributing their pay and benefits to making household ends meet.

They agreed that raising the minimum wage could make other costs rise, too.

Executive Director Chelsea Salifou said pantry hours include evenings and Saturdays because many of the people like Fairchild who seek food each month are working.

“You cannot support a family on minimum wage,” she said. But even from her vantage point, Salifou has reservations about raising the minimum wage, preferring the effort be spent on ensuring that people are trained with the skills for higher-paying jobs.

She said she believes raising the minimum wage might mean fewer jobs.

As Fairchild put it, waiting to hear her name called, “It's like a vicious cycle.”

Contact the writer: 402-444-1336,

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