Rosenfeld Realty Advisors: Minimum wage hike could mean a raise for all

Tuesday, January 14, 2014

Minimum wage hike could mean a raise for all

Working For Peanuts - Minimum Wage

More on the possible increase in the minimum wage. This one is being unevenly rolled out, so it has not hit every state yet. Some states have already increased their wages and Obama has a national initiative to raise it to $10.10 per hour in 2015. This article is regarding the effects of the increase in New Jersey, who raised it to $8.25. It starts with some large graphs that say between people directly affected by this increase and people indirectly affected total just 4.6 million people (estimated by the Economic Policy Institute). While it is nothing to sneeze at, this seems like a really low number to me. New Jersey is huge and there are lots of fast food and other industries paying minimum wage there. It examines how the increase directly affects the people making the hourly wage and how it indirectly affects the people just above the minimum wage which is fascinating. In this case, the lowest people on the labor rung were given increases, and the employer didn’t want to more experienced and valuable employees feel left out so they also got small raises (they are some of the indirect beneficiaries).

They are calling this the “ripple” effect. But they also examine the final person involved in this deal, the business owner. They just get to make less money, part of the grand plan of wealth equality? This article is mostly about a company called Gramma’s School House, a childcare center that is owned by Delores Riley in New Jersey. There are 16 employees. Now call me crazy but I don’t think this is what everyone thought of when thinking of raising the minimum wage. What I thought of, very happily, was the McDonald’s and Walmart’s of the world, taking it right on the chin (the bottom line). They are huge companies that can certainly afford to do this. But this type of small business like Gramma’s School House is not. And while it is great that some of the employees there got raises, the inevitable reality is that if things don’t improve in the economy, that these now higher priced employees will need to be let go.

The business is already making much less than it was before the recession in 2008 and business is going down. Meanwhile, the owner Ms. Riley is paying for all these increases out of her own pocket. So what probably happens? The big guys are not happy but they will be OK and these small businesses and the people that own them continue getting ground into nothing. Wealth equality? This is not how it is supposed to work but it looks like that is how it is unfolding in reality for many small businesses out there.

http://money.cnn.com/2014/01/14/smallbusiness/minimum-wage-hike/