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Life at $7.25 an Hour

Small Business 'at Bottom'

minimum wage
Robert Iles works for $7.25 an hour in Atchison, Kansas - the rate that is likely to become the nation's new minimum wage. (David Finkel - David Finkel -The Washington Post)

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.

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