i'm no economist, and i confess that i don't fully understand the interplay between all the factors involved in controlling growth and all that jazz, but i have to believe we can do better than this.I heard a minimum wage story the other day on NPR that said real prices have risen since 1988 (adjusted for inflation), but the minimum wage hasn't. I was left wondering who feels the squeeze the most and who is pocketing the profits. Although I'm getting my MBA, I'm in the same boat as Leo on this topic.
Life at $7.25 an Hour: As House Prepares to Vote on Minimum-Wage Increase, Issue Is Complex for Those Who Earn, or Pay, That Amount
By David Finkel
Washington Post Staff Writer
Wednesday, January 10, 2007
ATCHISON, Kan. -- It was payday. Money, at last. Twenty-two-year-old Robert Iles wanted to celebrate. "Tonight, chimichangas!" he announced.
He was on his way out of the store where his full-time job pays him $7.25 an hour -- the rate that is likely to become the nation's new minimum wage. Life at $7.25: This is the life of Robert Iles, and with $70 in a wallet that had been empty that morning, he headed to a grocery store where for $4.98 he bought not only 10 chimichangas but two burritos as well.
From there he stopped at a convenience store, where for $16.70 he filled the gas tank of the car he purchased when he got his raise to $7.25; then he went to another grocery store, where he got a $21.78 money order to pay down some bills, including $8,000 in medical bills from the day he accidentally sliced open several fingers with a knife while trying to cut a tomato; and then he headed toward the family trailer 19 miles away, where his parents were waiting for dinner.
Today in Washington, the House is scheduled to vote on whether to increase the federal minimum wage from $5.15 to $7.25. Passage is expected, with Senate approval soon to follow, and if President Bush signs the resulting bill into law, as he indicated he would, the U.S. minimum wage would rise for the first time since 1997, ending a debate about whether such a raise would be good or bad for the economy.
But even if the matter is settled in Congress, it isn't settled at all in Atchison, and Robert Iles's drive home is proof. Every stop he made on his ride home revealed a different facet of how complicated the minimum wage can be in the parts of America where, instead of a debatable issue, it is a way of life.
At the store where Iles works, for instance, the owner thinks the minimum wage should be increased as a moral issue but worries about which employees' hours he will have to cut to compensate.
At the store where he bought the chimichangas, the cashier who makes $6.25 worries that a raise will force her out of her subsidized apartment and onto the street.
At the convenience store where he bought gas, the owner worries that he will have to either raise prices, angering his customers, or make less money, "and why would I want to make less money?"
At the store where he got the money order, the worries are about Wal-Mart, which not only supports an increase but also built a Supercenter on the edge of town that has been sucking up customers since it opened three years ago.
As for Iles -- who keeps $70 out of every paycheck to cover two weeks' worth of food and gas and in a matter of minutes was already down to $26.54 -- his worry was as basic as how fast to drive home.
Drive too fast and he'd be wasting gas. But his family was waiting. And his chimichangas, best cooked frozen, were starting to thaw.
The Meaning of a Dollar
The debate about the minimum wage usually comes down to jobs. If Congress approves the increase, it will result in raises for an estimated 13 million Americans, or about 9 percent of the total workforce. That's a percentage that most economists agree would cause a modest increase in national unemployment. In Kansas, however, "it would have a fairly significant impact," said Beth Martino, a spokeswoman for the state Department of Labor. According to one independent analysis, 16 percent of the workforce, or 237,000 workers, would be affected -- and that doesn't include the 20,000 whose wages aren't governed by the federal Fair Labor Standards Act and earn the state minimum wage of $2.65. That rate, the lowest in the nation and unchanged since 1988, hints at the prevailing wisdom in Kansas about the minimum wage, which is that the only way low-wage earners will make more is through congressional action.
This holds true from Topeka, where the powerful Kansas Chamber of Commerce has long opposed any raise, to rural Mulvane, home of Republican state legislator Ted Powers, who says his futile effort three years ago to raise the state minimum wage resulted in his being branded a "dirty dog," to Atchison, a working-class city of 11,000 where the stores that depend on low-wage workers include one called "Wow Only $1.00!" This is the store where Robert Iles has worked for five years.
"Robert, would you help me a second?" Jack Bower, the owner, called to Iles soon after opening, as the line at the cash register grew. A onetime Wal-Mart vice president, Bower moved back to Atchison several years ago to teach and ended up buying the old J.C. Penney store, and now runs a business where the meaning of a dollar is displayed on shelf after shelf. The jar of Peter Piper's Hot Dog Relish? That's what a dollar is worth. The Wolfgang Puck Odor Eliminator that a customer was looking at as she said to a friend, "I just don't know how I'm ever going to make it. My ex-husband's not paying his child support"? That's a dollar, too, as is the home pregnancy test, the most shoplifted item in the store.
"This is not a wealthy community," Bower explained. "The thing is, a lot of people depend on this store."
Robert Iles has his own version of a dollar's meaning, learned last February when Bower took him aside and said he would be getting a pay raise to $7.25. "Okay," Iles remembers replying, wanting to seem businesslike. "But inside I was doing the cha-cha-cha," he said. "It was like going from lower class to lower middle class."
Soon after, he bought his car, a used 2005 Dodge Neon, and just about every workday since then he has spent his lunch break in the driver's seat, eating a bologna sandwich with the engine off to save gas, even in winter. An hour later, he was back behind the cash register, telling customers "Thank you and have a nice day" again and again.
And meanwhile, Jack Bower wondered whose hours he will cut if he has to give his employees a raise.
It's not that he's against raising the minimum wage -- "I don't think $5.15 is adequate," he said, adding that $7.25 seems fair -- but his profit margin is thin, and wages are his biggest controllable expense. So if wages go up, he said, hours will have to come down, and the question will become: Whose?
Will it be Neil Simpson, 66, who works six hours a day as a stockman, and then five more hours somewhere else cleaning floors, and takes care of a wife who is blind and arthritic?
Will it be Susan Irons, 57, who was infected with hepatitis C from a blood transfusion, is on a waiting list for a liver transplant and needs more hours rather than fewer?
Will it be Christina Lux, who is 22 years old and 13 weeks pregnant?
Will it be Iles?
"Attention, all shoppers," he said into the microphone. "We will be closing in 10 minutes. Please begin making your final selections." Ten minutes later, he was clocked out and back in his Neon. "My brand-new car," he called it proudly, and he explained how he was able to afford it on $7.25 an hour: a no-money-down loan for which he will pay $313.13 a month until 2012.
Small Business 'at Bottom'
Seven dollars and twenty-five cents an hour equals $15,080 per year, and out of that comes $313 for the car loan and $100 for car insurance, Iles said, going over his monthly bills. An additional $90 for the 1995 car with 135,000 miles on it that he is buying from a friend for his mother, $150 for the family phone bills, $35 on his credit card, $100 for gas, $100 toward the mortgage on the trailer. "That's about it. Oh yeah, $20 in doctors' bills," he said, and totaled it up on fingers scarred by surgical stitches. Nine hundred and eight dollars. "I bring home 900 a month," he said. "So I very rarely have any money for myself."
He parked in front of a store called Always Low Prices, which has the cheapest chimichangas in town.
Once it was a full-service grocery store with 28 employees. Then came word that Wal-Mart was looking for land for a Supercenter, and now it has become a bare-bones operation where the starting pay for its few employees is $5.50, and the manager wonders how the store will survive if wages increase.
"We're at the bottom. If the minimum wage went up, I don't know how we would make the cuts to cover it," Michelle Henry said. The lone salaried employee, she works 80 hours a week to make up for the lack of workers. "I have mixed feelings," she continued. "I know that people can't afford to live on $5.15 an hour. But on the business side, small businesses can't afford to pay it."
At the register, meanwhile, Shannon Wilk, 33, who makes $6.25 an hour, said that of course she would like to earn more money. It would help her. It would help her 18-month-old daughter. "It would be good," she said, "but also, for me, I live in income-based housing, and if I get a raise, my rent would go up, and I would lose my assistance." Even the tiniest raise would affect her, she said, and with nowhere to go, the last thing she can afford is a raise to $7.25.
In such an equation, the fact that she was working in Kansas was to her benefit. Atchison sits on the Kansas-Missouri border, and if Wilk worked a few hundred yards to the east, she would already be in jeopardy: In November, Missouri voters supported a ballot initiative increasing the state's minimum wage to $6.50, with an annual adjustment for inflation. Five other states had similar votes, with similar results, bringing to 29 the number that now require an hourly wage above the federal minimum. In the District the minimum is $7, in Maryland it's $6.15, and in Virginia it's $5.15.
Such is the arbitrariness of state-by-state minimum wage laws that Wilk feels lucky to be in Kansas making $6.25 an hour while inside at the first grocery store across the Missouri state line, the cashier was ecstatic that she was in a place where her pay was going from $6.20 to $6.50, explaining, "That's 30 cents more I ain't got."
Iles handed over a $10 bill for his 10 chimichangas and two burritos. He stuffed the change deep in his pocket, and headed next to a convenience store owned by a man named Bill Murphy, who said that if he had the chance to talk to new House Speaker Nancy Pelosi, he would ask one question. "Where does she think the money will come from? And that is the question," he said. "My wages are going to go up 10 percent."
Unlike Jack Bower, who would compensate by cutting hours, Murphy said that in his two convenience stores there are no hours to cut. "I'm going to have to raise my prices," he said -- not only because his workers who make less than the new minimum wage would get raises but also because those who earn more would insist on raises as well. Employees at $7.25 will want $8.25. Those at $8.25 will want $9.25.
Economists classify such workers as the ones who would be indirectly affected by a minimum-wage increase. Of the estimated 13 million workers expected to get raises, 7.4 million are in that category. "You've created this entitlement," Murphy said he would tell Pelosi.
And yet he will pay it, he said, and compensate with price increases, which he worries will be inflationary, even though most economists say that won't happen. He will raise prices, he continued, because the only other option would be to earn less money, which he doesn't want to do because he owes $1.5 million on his businesses and wouldn't want to default.
"Now that might be a stretch in some people's minds, from giving a guy a raise to not being able to pay the bank, but that's the path I'm talking about," he said. Against such a dire backdrop, Iles put $17 worth of gas in his car.
"That'll be $16.70," the clerk said to him, and instead of correcting this, Iles gladly took the change.
Thirty cents, suddenly got.
The Wal-Mart Factor
Iles drove past the Atchison Inn, where starting pay is $5.15, past Movie Gallery, where it's also $5.15, and stopped in front of Country Mart, the fanciest grocery store in town, where high school students start at $5.15 and, according to owner Dennis Garrett, "some of them aren't worth that."
A few days earlier, Garrett had gotten a letter from a lobbying consortium called the Coalition for Job Opportunities, urging him to write Congress to protest the minimum-wage increase. It came in the form of a letter already written, to which he merely had to add his congressman's name and send it off to Washington. "We are very concerned," the letter began, and it was signed by 25 organizations.
The most conspicuous signature, though, was the one that wasn't there, that of Wal-Mart, the nation's largest private employer, with 1.3 million workers. Wal-Mart won't say how many of those workers earn less than what the new minimum wage would be, but if the Atchison store is an example, starting pay is $6 an hour.
Nonetheless, in October 2005, Wal-Mart chief executive H. Lee Scott Jr. said in a speech that the "U.S. minimum wage of $5.15 an hour has not been raised in nearly a decade, and we believe it is out of date with the times." He went on to say, "Our customers simply don't have the money to buy basic necessities between paychecks."
When it comes to Wal-Mart, however, just about any announcement that affects public policy is greeted with suspicion, and that has been the case with the minimum wage. Some have said that Wal-Mart, in need of good publicity, is supporting an increase for public relations reasons; others have declared it an attempt to drive small, independently owned stores out of business.
These suspicions exist in Atchison as well. As in many small communities, Wal-Mart defines local retail, and just as Always Low Prices had to retool itself, Country Mart was significantly affected by Wal-Mart's new food-stocked Supercenter several miles away.
What is Wal-Mart up to? What are its true motives? Like many others, Dennis Garrett wonders. He imagines public relations is part of it, but he didn't want to speculate on whether this was an attempt to put him out of business, except to say that raising some wages wouldn't do that. He'd reduce some hours, he said. He'd manage.
Yes, Atchison businesses would be hurt initially, but in the long run, if unemployment increases, those hurt the most would be the very ones Wal-Mart insists would be helped -- the customers, especially the younger ones, "the people who don't advance their education and need a job between the ages of 16 and 21, 22, 23."
In other words, many of the workers in Atchison, one of whom was now at Garrett's service counter buying a money order so he could pay bills. Even though Iles has a checking account, this is the method he prefers because if he were to pay by check, and the check were to bounce because of insufficient funds, the penalty would be devastating. A $25 fee would require more than three hours of work.
And where would those hours come from?
'It's Tough for Me'
So go the calculations of a $7.25 worker, now headed home.
"It's an old trailer," he explained earlier in the day.
The heat doesn't work, he said, and the water heater works sporadically.
One of the bedroom ceilings is caving in. He sleeps in the other bedroom, and his parents sleep in the living room because his father, who has diabetes and had to have several inches of one of his feet amputated, can't really get around.
Also, his father has leukemia. And is legally blind. And his mother, who once made $6.50 an hour as an aide at a nursing home, quit to take care of her husband.
"We're pretty much living off my money," Iles said, and in he went to cook them dinner, bring payday to an end and, the next morning, start the cycle again.
Life at $7.25. Should that be the minimum wage?
"Yes," Iles said.
Even if it hurts job opportunities for people like him, as Dennis Garrett had suggested?
Or causes price increases, as Bill Murphy had suggested?
Or damages businesses such as Always Low Prices?
"I mean, it's tough for me, and I'm already making $7.25 an hour."
Or causes Jack Bower to reduce hours for one of his employees? Perhaps for Iles himself?
"It's just so hard for people. I mean, it's hard," Iles said, and then he went to work.
"I think it'll be bad today," one of the workers suggested as the line at the Wow Only $1.00! cash register began to form.
"Well, it depends on your perspective," Iles said.