Who's Afraid of a Higher Minimum Wage?
Monday, December 4, 2006
Nomey Druskin, manager of the Rainbow Hair Designers at the White Flint Mall, employs six shampooers. Mostly Hispanic immigrants, they are paid at the low end of the wage scale. Druskin should be particularly interested in the Democrats' intention to raise the minimum wage when they take over Congress, right?
She's not. Druskin pays her shampooers at the North Bethesda salon a base rate of more than $8 an hour. That's higher than the federal minimum wage ($5.15), higher than Maryland's minimum wage ($6.15) and higher than what the Democrats are proposing federally ($7.25). In fact, the median hourly rate for all shampooers in the Bethesda-Gaithersburg area, according to federal statistics, is $7.48 -- above all mandated minimums.
Druskin said the shampooers at her 30-year-old salon earn what they earn -- plus tips -- for a few reasons. First and foremost, it would be inhumane to pay them less, she said, given the cost of living in the Washington region. And if she didn't pay them a decent salary, she couldn't attract good, stable help. The shampooers wouldn't smile as easily at their customers. The hair wouldn't be washed just right, and the business, which serves a high-end clientele, would suffer.
"We have to pay them enough to make them happy and for them to live happily," Druskin said. "It's a domino effect from the bottom up. We want the clients to be happy."
Druskin's experience suggests that increasing the federal minimum wage might be irrelevant for many of this region's workers and employers, given the extent to which market forces -- high demand for labor, low unemployment and the lofty cost of living -- have already raised the floor for hourly salaries. According to federal data, the median hourly pay for all workers in the Washington-Arlington-Alexandria area is $19.14 -- about 72 percent higher than Lubbock, Tex., where it is $11.13.
Dressing-room attendants make about $8.41 an hour here. Photographic processing machine operators: $10.29. Dishwashers: $8.05. Lifeguards: $7.98.
"Raising the minimum wage won't really matter for us," Druskin said. "We are already above that."
So are most other big job centers around the country, with only about 520,000 people nationwide making the federal minimum of $5.15 an hour, a rate that hasn't gone up in a decade and has led some 28 states and the District to pass their own increases.
"When you let the minimum wage fall as low as it's fallen, it becomes almost irrelevant," said Harry J. Holzer, professor of public policy at Georgetown University and a former chief economist for the Labor Department. "This is an attempt to make it somewhat more meaningful, but not so meaningful that it destroys a lot of jobs."
While the number who make the federal minimum wage is minuscule compared with the total workforce of 132 million, economists think that several million workers would be affected by a change in the law. The Economic Policy Institute, a Washington think tank, estimates that the number of workers making at least $5.15 an hour but less than the Democrat-proposed $7.25 will be 5.6 million by 2009 -- when the proposed increase would be fully phased in.
Then there are the workers who already make $7.25 an hour, or a little more. Liana Fox, an economic analyst for the institute, thinks these workers would also see a small bump in wages to keep the pecking order. The institute puts about 7.4 million workers in that category. That means 13 million people, or about 10 percent of the workforce, could be affected by an increase.
Of those workers, about 79 percent are 20 or older, the institute estimates. Forty-six percent work in sales or service. About 61 percent are white; 59 percent are women.
Locally, about 450,000 workers in Virginia -- 13 percent of the state's workforce -- could be affected, according to an EPI analysis. The total in Maryland is 116,000 workers, 4.4 percent of the workforce. An analysis for the District was not possible; the sample size was too small.
Economists and analysts for years have argued about the possible negative effects on the workforce of raising the minimum wage. Some, like Fox and Holzer, think those would be negligible, given that the dollar amount of the increase is not great. Also, Fox said, "this is such a small fraction of the total labor force."
But other economists say that raising the minimum wage would lead employers to reduce their staffs, eliminating jobs for the least-skilled employees. The National Restaurant Association recently released a poll in which 41 percent of family dining and casual restaurant operators said they would cut jobs because of increases in the minimum wage.
Jim Wordsworth, who owns the steakhouse J.R.'s Stockyards Inn in Tysons Corner, starts his dishwashers at $7.20 an hour, and some make more than that. He said he wouldn't cut jobs if the minimum wage went up, but he wouldn't add any.
Would he increase salaries for those already making more than the new minimum?
"If I'm forced to by the market," he said. "I respond to market conditions."
Carlos Castro is another area employer who said he won't cut workers if the minimum wage goes up. As the owner of Todos Supermarkets in Alexandria and Woodbridge, he pays a starting wage of $7 an hour for cashiers, stockers, meat cutters and cooks -- well above the $5.15 minimum in Virginia.
"You just can't get by on minimum wage these days, and I don't want to force my employees to have to get a second job to support themselves," Castro said.
Castro said that if Congress increases the federal minimum wage, he will probably raise his pay to keep it above that -- precisely what the EPI anticipates happening around the country.
"My philosophy is to pay a little more than at other places to make sure we get better workers," he said.
Staff writers Cecilia Kang and Amy Joyce contributed to this report.