Inflation twists minimum pay issue

Missouri’s minimum wage will increase to $6.50 an hour on Jan. 1, just three days before Democratic Sen. Ted Kennedy of Massachusetts is scheduled to introduce a bill in Congress that eventually could trump that wage with a higher federal figure.

Missouri would go along with the federal minimum wage if it rises above $6.50 per hour. But the annual inflationary adjustments approved by Missouri voters as part of Proposition B in November would remain in effect, said Sara Howard, a spokeswoman for the Proposition B campaign.

Kennedy’s bill calls for a three-part increase in the federal minimum wage from $5.15 an hour to $7.25. If the bill is approved next year, the minimum would rise to $5.85 an hour 60 days afterward, to $6.55 in 2008 and to $7.25 in 2009.

Even without the federal increase, Missouri’s inflationary indexing of the minimum wage remains a top concern for business leaders.

As it stands, Michael Grote, vice president of governmental affairs at the Missouri Chamber of Commerce, expects the state to lose jobs as a result of the annual adjustment. Most businesses, he said, already pay more than the federal minimum wage of $5.15 an hour and would not likely object to a $6.50 state minimum.

However, Grote said, the annual wage growth might outpace businesses’ growth. For instance, if inflation were to push salaries up by 3.1 percent, a business experiencing only a 1 percent increase in growth might be forced to cut jobs to stay afloat.

“They don’t get to go pick fruit off the money tree,” he said.

Proposition B was heavily championed by the Association of Community Organizations for Reform Now, or ACORN, which also led successful efforts to increase the minimum wage in Arizona, Ohio and Colorado. Grote said ACORN started working to put the initiative on the ballot in Missouri after the General Assembly had adjourned, which prevented legislators from taking action against the measure as lawmakers in Arkansas and Michigan did.

“It is incredibly short-sighted of ACORN to go out and appeal to increasing workers’ minimum wage,” Grote said. “Instead of increasing these individuals’ minimum wage, (the inflation) will make them unemployed. It may not happen this year, and it may not happen next year, but when businesses are forced to pay more than they can, they will fire people if that is their only option.”

Grote said that while many businesses in Columbia already pay more than $6.50 an hour, inflationary adjustments to wages could be the kiss of death, especially to small businesses.

“It’s going to hurt Columbia, and it’s going to hurt the rest of the state,” Grote said. “When you tax (businesses) and penalize them to levels they can’t afford, their option is to shut doors. You’re going to be without services in those communities.”

Florida voters in 2004 approved a minimum wage of $6.15 an hour, which took effect in 2005, with annual inflationary increases. Those moves by Jan. 1, 2007, will have caused a minimum wage increase of nearly 30 percent, said economic analyst Bill Dobson of the Florida Agency for Workforce Innovation. The inflationary adjustment boosted the minimum to $6.40 this year; in 2007 the minimum will be $6.67 an hour.

By comparison, the 3 percent increase given to many workers each year would have created only about a 10 percent increase after three years. Still, Dobson said Florida has experienced no problems.

“Our employment is still growing, business is still expanding,” he said.

Don Laird, president of the Columbia Chamber of Commerce, said that while Missouri’s increase from $5.15 to $6.50 might hurt some smaller businesses, the inflationary index will affect everybody.

“It will spiral into a situation that may not work,” Laird said, pointing out that in 1996, a similar motion to tack an annual inflationary increase to the federal minimum wage was struck down by the General Assembly.

Businesses, however, are not the only ones who will be affected by the state increase. At its Monday meeting, the City Council reviewed a report from the Human Resources and Parks and Recreation departments that said the city would incur an estimated $68,500 in extra costs because of the wage increase, which includes higher Social Security payments. City officials are particularly concerned about the impact on the Recreation Services Division, which employs a lot of lower-wage workers, particularly at swimming pools. The impact, especially when inflationary adjustments are considered, might force Parks and Recreation to reduce programs or raise recreation fees, the report said.