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$9 minimum wage could raise prices near Ohio State’s campus

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A local business owner said he’ll be forced to raise his prices if minimum wage is raised to $9 as President Barack Obama proposed in his State of the Union address.
Kraig McHenry, owner of Pita Pit at 1988 N. High St., said customers can expect price increases on the restaurant’s menu if minimum wage is increased by $1.15.
“I would say the biggest effect … (would be) what businesses would have to pass on to the consumer,” McHenry said. “That increase in expense would have to be matched by some increase in revenue.”
McHenry said the change would lead to increased employer liability and payroll expenses as well.
Obama said in his State of the Union address Feb. 12 that he wants the minimum wage to be $9 an hour to help pull low-income families out of poverty.
“This single step would raise the incomes of millions of working families,” he said. “It could mean the difference between groceries or the food bank, rent or eviction, scraping by or finally getting ahead.”
If the law is passed, employers will have to adjust accordingly.
Ohio’s minimum wage is set at $7.85 unless a business grosses less than $288,000, in which case the minimum rate is set at the federal minimum wage of $7.25, according to the U.S. Department of Labor website.
Obama wants the law change to be in place by 2015, and it must pass through a House of Representatives currently controlled by Republicans.
Ohioan and U.S. House Speaker John Boehner had thoughts on the changes to taxes and spending Obama proposed during his speech.
“He offered them little more than more of the same ‘stimulus’ policies that have failed to fix our economy and put Americans back to work,” Boehner said. “We cannot grow the middle class and foster job creation by growing government and raising taxes.”
The need for employers to cut employees as a result of minimum wage increases has been studied in the past, said Ethan Doetsch, a senior lecturer in labor economics.
Cutting back employees to compensate for increased wages is the negative employment effect and is perhaps the most tested result in theory with labor economics, Doetsch said.
“Increasing the minimum wage is not going to have a large impact on employment,” he said. “It’s not going to drive down employment.”
Doetsch said the next challenge will be determining how employers will compensate for the higher wages if they are not cutting back employees.
Doetsch said employers might increase prices, decrease workers’ hours and being more stringent about breaks to ensure they keep revenue up.
Most minimum wage workers are under the age of 25, Doetsch said, which is a majority of OSU undergraduates.
Brandon Upchurch, a first-year in psychology, said he likes the plan to raise minimum wage.
“It seems like a good idea,” he said. “It’s good that (Obama) is trying to make positive change in the world.”
Evan Nolan, a third-year in chemical engineering, said he thinks it should help stimulate the economy.
“It gives more consumers money to buy stuff and that will help the economy … it allows money to flow and then it will go back to the producers of the goods,” Nolan said.
McHenry said he likes giving more money to the employees but he wants it done carefully so that businesses will not be put on the “back burner.”
Raising the minimum wage is helpful for low-income families, but it is not a simple fix to the poverty problem in America, Doetsch said.
“It’s not a panacea,” he said. “It’s not a magic button to push to raise the bottom levels of the income scale.”

This article has been revised to reflect the following correction:

Correction: February 21, 2013

An earlier version of this story stated that cutting back employees to compensate for increased wages is the negative employment rate. In fact, it is the negative employment effect. Also in an earlier version, Ethan Doetsch said increasing minimum wage might cause employers to decrease operating hours. In fact, he said it might cause employers to decrease workers’ hours.

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