Floor rises on minimum wage

08/01/2005

Norman Draper,
Star Tribune
August 1, 2005

Some extra pocket change or a bottom-line burden?

Justice for the underpaid, or a business buster?

Today, about 129,000 Minnesota wage earners start getting a bump in their pay, and an unknown number of businesses begin racking up higher expenses as a result. The state minimum wage goes up from $5.15 to $6.15 an hour for most businesses.

In the Twin Cities, bartenders, waiters and waitresses are most likely to benefit, and bars and restaurants will bear most of the additional costs.

Workers participating in Goodwill/Easter Seals of Minnesota’s job training programs will now get a $1-an-hour raise, as will some sales people and teenagers working at summer camps or at other temporary jobs. It is harder to determine other affected jobs. Workers such as laborers, dishwashers, car washers, hotel maids and parking lot attendants generally get higher hourly wages than the new state minimum.

Chastity GothmannDavid BrewsterStar TribuneFor many in the hospitality industry, it’s either a small, but welcome, sweetener or the latest in a series of unwelcome measures that cut into low-margin profits. For some others, it creates a dilemma.

“I would never say I don’t want to make more money, because I do,” said Gothmann, whose hourly wage will get bumped from $5.95 to $6.15 an hour. “But the increase would be minimal. ... I obviously don’t have the job based on hourly wage. The tips are where I make more money.”

Gothmann figured she takes in $30 to $50 a day in tips working a lunch shift that lasts about four hours. A waitress at the Medina Entertainment Center for eight years, Gothmann started out at minimum wage. Since then, she’s gotten two hourly raises. With this new minimum wage law, she figures, the new servers will automatically get bumped up to the raises it’s taken her eight years to earn.

“In a sense, it’s giving them all raises,” she said. “That does bother me a little.” And for the newcomers who are getting a dollar-an-hour boost?

“They think it’s great,” she said.

Sue Jeffers is fit to be tied about the new minimum wage law, which she figures could cost her an extra $40,000 a year. It’s the most recent in a parade of changes Jeffers said are chipping into her business. There’s the smoking ban and lowering the drunken-driving blood alcohol level to 0.08 percent. Now, here’s the extra $1 an hour she has to pay to her minimum-wage employees, who include servers and bartenders, or about half of her current staff of 15.

“Bars and restaurants operate at a 2 to 6 percent profit margin,” she said. “When you start cutting 40 grand a year out of that and adding regulations, it makes it harder for us to stay in business.”

Jeffers predicts she’ll have to jack up prices, which she previously did when the smoking ban was adopted by Minneapolis last year. Also, she’s figuring on a staff of 25 this fall, rather than the usual 30, to cut expenses. That could be a problem for a bar that borders the University of Minnesota and can get stuffed with fans before and after Gopher games.

Plus, Jeffers said, boosting the minimum wage could have a ripple effect on other employees, such as cooks and dishwashers, who’ll want more, too.

“I’m never going to be able to start an untrained cook at $8 an hour anymore,” she said.

Do her employees like the new minimum wage?

“Sure,” Jeffers said. “It’s another dollar in their pockets.” So could the new minimum wage force her to close up shop?

“Naw,” said Jeffers, who has owned the bar for almost 26 years. “I’m too mean.”

One of the reasons Landers came to Minnesota in the first place was the state’s generous minimum wage. He gets the minimum, and he’ll gladly take the $1-an-hour boost. But as with many bartenders, it’s a drop in the bucket compared with what can come in from tips. Landers figures he can take in $150 to $200 in tips alone on a good night.

“None of us is in it for the wages,” Landers said. “The wage barely covers the taxes if you’re in the right bar.”

At the high-end bars, there are bartenders he knows who can earn $1,000 a night. Landers figures about $50 in tips for the bartender at the low-end bar. That could be why the new minimum wage hasn’t created too much of a stir in his line of work.

“It’s not the type of thing people get real excited about,” he said. “I don’t think there’s one person in the service industry who complains about their wages.”

Matter and the other folks at Goodwill/Easter Seals are in a quandary: Philosophically, they’d like to see the 1,100 people in their job training programs get a $1-an-hour raise. But, realistically, they say, how can it work?

Currently, they pay $1 million a year to their trainees, who are often people with disabilities or job skills problems who need preparation before entering the workforce full time. The new minimum wage will add, potentially, hundreds of thousands of dollars annually to their costs.

“We value increases in wages for the individuals we serve,” Matter said. “But we will have to identify additional resources or potentially serve fewer people. ... It is a little bit of a double-edged sword for us.”

Because of that, Goodwill/Easter Seals did not lobby against the new minimum wage law. The charity’s regular employees make more than the new state minimum, Matter said.