Business

Since 2005, Christa has written a monthly human resources column "People" for QSR Magazine (www.qsrmagazine.com), a national trade magazine for restaurant franchisees and corporate executives. The piece below published in the September 2006 issue.
 

An Ongoing Battle

Election aspirations are fueling the minimum wage issue—again. What does the future hold?

By Christa Gala

It’s been a busy year for the National Restaurant Association in our nation’s capital. Earlier this year, the organization battled proposed immigration reform that threatened to deport millions of the industry’s workforce. More recently, the minimum wage debate between Democrats and Republicans gained momentum, seeming to change daily as new amendments were introduced.
       In June, Senator Ted Kennedy proposed an amendment to increase the minimum wage in three stages by 41 percent to $7.25 per hour. Had it passed, it would have been the largest wage increase in the history of the United States. The amendment failed, receiving only 52 votes and needing 60.
        This kind of activity in Congress is nerve-wracking to be sure, but not surprising, says Brendan Flanagan, vice president of federal relations for the NRA.
      “Ever since the first quarter of the year, Senator Kennedy said that he was going to bring up the minimum wage. He brought it up twice last year and it failed both times,” Flanagan says.
       But with re-election on the minds of both parties, the minimum wage issue is not likely to die down anytime soon.
       In fact, shortly after Kennedy’s amendment failed, Senator Michael B. Enzi (R-Wyo.) proposed an amendment that seemed to address both sides of the issue, raising the minimum wage to $6.25, while also allowing faster tax depreciation for restaurants as well as tip-credit relief for some employers.
      “The Republicans offered an alternative with a more modest increase coupled with some small business incentives that were designed to lessen the burden on small businesses that will have to pay for the increase,” says Flanagan.
       But Enzi’s amendment also fell short of the required 60 votes, receiving only 53, much to his disappointment.
      “It is unfortunate that we did not get the 60 votes needed,” says Enzi, chairman of the Senate Committee on Health, Education, Labor and Pensions. “I think too many of my colleagues on the other side of the aisle, under the pressure of an election year, decided it was their bill or bust. That is disappointing to me, but I’m going to keep trying to work with them to address the real solution to low wages in America – improving worker skills.”

NRA says: No hike at all
Although Enzi’s proposal offered attractive incentives for restaurants in addition to a more moderate wage increase, Flanagan says the NRA is opposed to any wage increase. The message the NRA is sending to Washington, D.C is this:
      “Mandated wage hikes are not sound economic policy, and they do cost the economy jobs; it’s important for Congress to note that it’s not appropriate for it to impact businesses in this way,” says Flanagan, noting the last wage increase caused the industry to lose more than 200,000 jobs.
      “History shows us that wage hikes hurt restaurants,” he says. “Obviously one of the greatest strengths of the industry is providing employment opportunities to the country. This hinders our ability to do so.”

Not as simple as it seems
One thing most seem to agree on is that the minimum wage issue will continue to attract attention. Enzi acknowledges this and plans to approach the issue from several different angles, including tackling the problem at the root.
       Congress needs to “to extend proven job-building programs, particularly the Workforce Investment Act (WIA) and YouthBuild, which together will spark added momentum in the growing economy,” Enzi says. “These programs are essential to help both workers and employers close the skills gap that jeopardizes America’s long-term competitiveness.”
        For Enzi, a mandated wage hike is simply not the answer for America’s working poor. “Apart from the financial burden it would create for small business, this proposal is fundamentally flawed because it presumes that         Congress will meaningfully address the real issues of our lowest paid workers by simply imposing an artificial wage increase. That is simply not the case. Regardless of the size of any wage increase, the reality is that yesterday’s lowest paid worker, assuming he still has a job, will continue to be tomorrow’s lowest paid worker.”
       Flanagan maintains a mandated increase could actually hurt the people it’s designed to help.
      “It’s our message that a mandated wage hike is not the right approach to addressing wage issues because of the impact that it has. If you consider for a moment that the people who would be most significantly impacted by a wage hike, they’re not going to benefit if their job is jeopardized,” says Flanagan.
        While a wage hike may seem attractive for the short-run, the fall-out could be disastrous. Businesses are already facing double-digit health coverage increases, in addition to rising costs for both electricity and commercial natural gas. A minimum wage increase could be more than some businesses could bear.
        “According to a recent survey, 77 percent of economists agree that a minimum wage hike would cause job losses,” Enzi says. “A 2001 study conducted by Stanford University economists found that three in four of the poorest 20 percent of American families would be hurt by a minimum wage increase because they would shoulder the costs of higher prices. I believe that there are serious consequences of raising the minimum wage. For every winner, there will be many, many losers.”

Speak up
It is Flanagan’s job to keep an eye on the minimum wage issue and he’s not about to disappoint.
      “The outlook for the next couple months, given that this is an election year, and Democrats at the very least believe that this is an issue that helps them in the November election, they’re going to continue to bring it up. As an industry, we’re going to have to remain vigilant and closely watch for opportunities in the near future for them to continue to bring this up.”
       Flanagan is encouraging restaurant owners to contact relevant senators and voice their opinions; the NRA often sends email to its members that include contact names and telephone numbers.
       “It is very important for employers from all over the country to weigh in with their senators and their congressman to let them know about the negative impact such an increase would have on their businesses. The amount of attention that lawmakers pay to their constituents, particularly employers, cannot be underestimated.”

What’s next?
       For Senator Enzi, the way he sees it, the problem isn’t the minimum wage, it’s that there are so many Americans with minimum skills.
       “What we need to focus on is not an artificially imposed number, but on the acquisition and improvement of job and job-related skills. In this context we should recognize that only 68 percent of the students entering the ninth grade four years ago are expected to graduate this year, and that for minority students this number hovers around 50 percent.
      “In addition, we continue to experience a dropout rate of 11 percent per year,” Enzi continues. “These non-completion and dropout rates—and the poor earnings’ capacity that comes with them—cannot be fixed by federal wage policy. We need to focus on creating and executing programs like WIA, the Perkins Career and Technical Education Act, and YouthBuild, and we need to improve high school graduation rates. This approach will create lifelong opportunities for education and employment for many more Americans than would benefit from an artificial wage increase.”