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Minimum wage proposal divides businesses

Minimum wage proposal divides businesses

October 11th, 2018 by Philip Joens in Local News

A proposal to raise Missouri's minimum wage to $12 per hour by 2023 is dividing businesses.

Proponents of the measure said wages need to be increased to keep up with rising costs for basic necessities. Opponents said the change would harm businesses and could force companies to lay off workers.

Political Action Committee Raise Up Missouri led the campaign to put the issue on the ballot. Communications Manager Tony Wyche said the group wants the state's minimum wage to reach a level that covers rising costs for food, housing and health care.

Minimum wage earners make about $314 per week, or $16,000 per year, according to a news release issued by the group.

"Nowhere in the state is that enough to cover the basics that people need to care for their families," Wyche said.

If passed by voters, Proposition B would raise Missouri's minimum wage from $7.85 per hour to $8.60 per hour Jan. 1. The minimum wage then would be raised by 85 cents per hour for the next four years until it hits $12 per hour in 2023.

Missourians last raised the minimum wage in 2006 when voters approved raising it from $5.15 per hour to $6.50 per hour. Current law ties raises to the minimum wage to the Consumer Price Index.

Business groups including the Missouri Retailers Association, Associated Industries of Missouri, and the Missouri Chamber of Commerce and Industry have spoken out against Proposition B. No PACs formally opposing Proposition B exist, according to the Missouri Ethics Commission.

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Progressive groups have poured money into the effort to pass Proposition B.

Raise Up Missouri raised more than $1.7 million during this election cycle, according to the group's July campaign finance filings with the Missouri Ethics Commission. At the time, the group had $566,60.56 in cash on hand.

Since then, Raise Up Missouri has received at least $4.2 million from groups outside the state, according to reports filed with the Ethics Commission.

The largest donation from outside Missouri came Aug. 31 from a $3 million donation from the Sixteen Thirty Fund, a Washington-based nonprofit not required to reveal its donors. The Sixteen Thirty Fund also contributed $641,000 to Raise Up Missouri on Oct. 5.

In September, Raise Up Missouri accepted donations of $500,000 from New York-based nonprofit group the Black Progressive Action Coalition and $100,000 from Washington-based nonprofit The Fairness Project.

"We are a product of support from people in all quarters, from people knocking on doors to people who have funded us because they know that $314 per week is not enough to live on," Wyche said.

Wyche argued that as the country came out of the Great Recession wages did not keep up with inflation. The U.S. unemployment rate was 3.9 percent in July, according to U.S. Labor Department data. An hourly rate of $4.03 per hour in January 1973 had the same purchasing power as an hourly wage of $23.68 in July 2018, according to an August study by the Pew Research Center.

Wyche said raising Missouri's minimum wage could take 10 percent of working families off of government assistance programs.

"By raising their wages, you'll help workers become more self-sufficient to be able to take care of their families and reduce their dependence on programs like food stamps," Wyche said.

Still, many business groups worry about the effect increased labor costs could have on businesses.

Ray McCarty serves as president of Associated Industries of Missouri, a Jefferson City-based trade group that represents businesses and manufacturers around the state. McCarty said businesses could pass costs along to customers if the minimum wage rises.

"Just because we have a higher minimum wage doesn't mean necessarily businesses have more money to be able to pay the wages with," McCarty said. "(Raising prices) can make them uncompetitive in a world economy."

David Overfelt, president of the Jefferson City-based Missouri Retailers Association, said companies may be forced to cut jobs or hours for low-wage earners.

"If you're in a business and you cannot shift your costs, you're going to have to do something," Overfelt said. "Generally it's going to hurt small businesses and people that cannot adjust to the cost."

Overfelt said companies should be able to decide if they want to raise wages.

"You can't grow businesses when you are constantly trying to regulate them out of business," Overfelt said.

If Missouri voters approve Proposition B, 10,000-12,000 jobs could be eliminated by 2023, conservative-leaning think tank the Show-Me Institute cautioned in a September study.

Matthew Panik, Missouri Chamber of Commerce vice president of governmental affairs, said the state chamber strongly opposes Proposition B.

Hours would not necessarily be cut at all businesses, Panik said.

"Businesses will have to evaluate what they will do if the wages to provide that service increase," Panik said. "You almost have to look at it industry by industry."

Not all businesses oppose Proposition B. More than 450 business representatives signed a list supporting Proposition B, according to Businesses For a Fair Minimum Wage, a group of business owners that support the measure.

Eleven Jefferson City business owners signed to indicate their support: Spectators Sports Bar & Grill owner Scott Drinkard, Love2Nourish owner Laurel Dunwoody, J.R. Pain Management owner Julie Ruengert, Antiquarium owner Lance Salmons, Premium Pets owner Brittany Schlup, Haute Salon owner Brandon Scott, Red Wheel Bike Shop owner Nick Smith, Modern Technologies owner Kevin Wendel, former High Handsome owner Steve Gilpin, former Simply Chic owner Kiley Hartzler and Goodrich Quality Theaters owner Bob Goodrich.

Grand Rapids, Michigan-based Goodrich Quality Theaters owns the GQT Capital 8 Theaters near Capital Mall in Jefferson City and the Goodrich Forum 8 movie theater in Columbia. Hourly GQT employees in Missouri start by making about $8 per hour, Goodrich said, and every 120 days employees receive a 5-cent-per-hour pay increase.

Paying employees more reduces turnover costs by giving employees an incentive to stay in their job longer, Goodrich said.

"Most people stay with us the better part of a year," Goodrich said. "They can meet the needs of a customer better than if they're brand new."

Goodrich is unconcerned about the impact on his own bottom line and said raising the minimum wage will help his employees pay for necessities.

"When a business man says, 'Raising the minimum wage is going to affect my business,' he is really saying, 'I'm going to make less,'" Goodrich said. "That concerns me and is really unfair."

Proposition B needs approval from a simple majority of voters to pass. Its effect on the state's working class could be large, but proponents and opponents remain split over how the pay increase would reach its intended targets.

Raising the minimum wage to $12 per hour would affect 670,000 Missourians and result in an increase of $1 billion in consumer buying power by 2023, according to the left-leaning Economic Policy Institute.

Overfelt does not believe that math.

"There is not going to be $1 billion spent because it's absolute nonsense," Overfelt said.

The Show-Me Institute report found 2.4 million Missourians would be affected if voters pass Proposition B. Only 21 percent of beneficiaries from the raise in wages live in families with wages of less than $20,000 per year, according to the Show-Me Institute.

Raising the minimum wage would fail to increase purchasing power for the state's poorest residents, the study concluded.

"Two-thirds are in families with incomes of $30,000 or more, suggesting that an increase in the Missouri minimum wage would do a relatively poor job of targeting families at the bottom of the income distribution."