Local business, professor react to proposed wages

A raise in minimum wage was proposed in a bill by President Barack Obama in February. Sen. Tom Harkin, D-Iowa, and Rep. George Miller, D-Calif., proposed a separate minimum wage raise in March.

Obama proposed minimum wage be raised to $9 per hour with automatic adjustments for inflation, while Harkin and Miller propose it be raised to $10.10 per hour.

Minimum wage, the minimum hourly wage an employer can pay an employee for work, is $7.25 in Indiana, which is also the federal minimum wage.

A raise in minimum wage would affect the way some businesses function.
Danielle Schafer, store manager at Bloomington’s Plato’s Closet, a gently-used clothing store, said a raise in minimum wage would change how much money the store makes, because the crew labor percentage would be higher.

The crew labor percentage is the percent payroll takes of the total sales.
Schafer said she would also have higher expectations of her employees if the minimum wage were raised.

 There would be less floor coverage in the store, which could affect the organization and the overall sales, Schafer said.

IU Economics Professor Gerhard Glomm said if the point of raising minimum wage is to alleviate poverty, then there are a few issues that must be taken into
consideration.

Glomm said raising minimum wage is not well-targeted. He gave the example that his daughter worked a minimum wage job in Bloomington this summer. If the minimum wage were raised, it would be helping middle class teens, who would probably be using the money to go out to eat or to the movies, Glomm said.

If workers were to move from part-time to full-time or earn more, they would probably not qualify for food stamps or housing subsidies anymore, Glomm said.

“Raising minimum wage creates another class of people who drop out high school prematurely, and this is the last thing we need as a country,” Glomm said.

Glomm said if people want to help those in poverty, there are other ways to do it.

One alternative to raising minimum wage is to raise earned income tax credit. An EITC reduces the amount of tax a worker owes and may also give them a refund.

Glomm said raising EITC gives more incentive to hire people than raising the
minimum wage.

If a fast food restaurant hires people at minimum wage, and minimum wage were to be raised, it is probable that other costs will go up. In the end, it will be the customers who will be paying for the wage raises, Glomm said.

Glomm also said there are strong theories that say raising minimum wage would destroy jobs, but other theories say it might create jobs.

Follow city government reporter Mary Hauber on
Twitter @mary_hauber.