Wage battle: Chattanooga reaction mixed to Obama's plan to raise minimum pay

Wage battle: Chattanooga reaction mixed to Obama's plan to raise minimum pay

February 16th, 2013 by Shelly Bradbury in Local Regional News

Austin McDonald tries to attract customers to the Sun Tan City on Dayton Boulevard. He earns $8 an hour, 75 cents more than the federal minimum wage. Staff photo by Shelly Bradbury

POLL: Should the minimum wage be raised to $9?


At the current minimum wage of $7.25 an hour, a full-time worker employed 40 hours a week would be paid $15,080 a year. If that wage rate rose to $9 an hour, that worker would make $18,720.


Family size -- annual income

1 -- $11,490

2 -- $15,510

3 -- $19,530

4 -- $23,550

5 -- $27,570

6 -- $31,590

Source: U.S. Department of Health and Human Services


• U.S. -- 3.8 million

• Tennessee -- 101,000

• Georgia -- 196,000

• Alabama -- 74,000

Source: U.S. Department of Labor


1938: 25 cents

1939: 30 cents

1945: 40 cents

1950: 75 cents

1956: $1

1961: $1.15

1963: $1.25

1967: $1.40

1968: $1.60

1974: $2

1975: $2.10

1976: $2.30

1978: $2.65

1979: $2.90

1980: $3.10

1981: $3.35

1990: $3.80

1996: $4.75

1997: $5.15

2007: $5.85

2008: $6.55

2009: $7.25

Source: U.S. Department of Labor

Liz Ragsdale works 35 hours a week at Sun Tan City and brings home a $560 biweekly paycheck, before taxes - and she earns $8 an hour, 75 cents more than the federal minimum wage.

"I can't imagine living off the minimum wage," the UTC student said. "You can't live off the minimum wage."

She hopes legislators agree to President Barack Obama's State of the Union proposal to jump the federal minimum wage to $9 an hour and tie the rate to future increases in inflation.

"I'd have more money, less credit card debt and less loans for school," she said. "I think it'd be good."

But others aren't so sure. Greg Adkins, Tennessee Hospitality Association president and CEO, said that while many restaurants, bars and hotels already pay most employees above the minimum wage, an increase to $9 an hour could force some businesses to lay off workers.

"Our position has always consistently been that free market enterprise should be controlling wages, not the government," he said. "What ends up happening with these types of artificial market changes is that our businesses either have to pass it on to the consumer or decrease costs. And usually the only costs we can decrease is through cutting positions."

About 48,000 Tennessee workers earn $7.25 an hour, which would slowly slide up to $9 an hour by 2015 under Obama's proposal. While workers say they'd appreciate the raise, some employers don't know where the money would come from.

Sri Mandadapu, who owns a Raceway gas station on Dayton Boulevard, said he pays his two employees $7.50 and $8 an hour.

"Right now, $9 is too high for us," he said. If he had to start paying $9 an hour tomorrow, he'd probably open at 6 a.m. instead of 5 a.m. to make up the difference, he said. But if the increase is gradual, he thinks he could swing it by 2015.

"If the economy improves," he added.

Help or hurt?

Whether a minimum wage hike would hurt or help the economy is at the center of the debate -- opponents say a high minimum wage unnecessarily burdens employers and reduces the demand for low-skill workers. But supporters argue that when minimum wage workers earn more, they spend more and boost the economy.

"It's not just a good idea, it's a double-good idea," said Doug Hall, director of the Economic Analysis and Research Network at the Economic Policy Institute. "We know from consumption patterns that those very same people are going to spend that money -- they're going to spend it immediately, they're going to spend it locally and they're going to spend it almost completely."

In the 19 states with minimum wages above the federal rate, the proposed change will be less dramatic -- nothing would change in Washington, where the state minimum is at $9.19.

But in states such as Tennessee, Georgia and Alabama, where there is no state minimum wage, the impact is clear, Hall said.

The proposed $1.75 raise would benefit around 411,000 workers in Tennessee, he said. That would result in $445 million in additional wages and create 2,400 new jobs in the state, he said.

But state Sen. Todd Gardenhire, R-Chattanooga, said increasing wages when the economy is weak is a bad idea.

"The minimum wage increase really hurts two types of people," he said. "It hurts the small-business person, and it absolutely just kills young people trying to get a job. You're going to put a lot of businesses that are on the edge right out of business, which will cause higher unemployment. It sounds good and appeals to a lot of people, but economically it just doesn't work."

Republican U.S. Rep. Chuck Fleischmann, R-Tenn., also supports the free market, communications director Tyler Threadgill said.

"There is an inherent risk that requiring an increased minimum wage will make it unnecessarily harder for an entry-level worker to enter the workforce and develop the skills they need to advance," Threadgill said.

State Rep. JoAnne Favors, D-Chattanooga, said she supports the wage increase.

"We've had several opportunities to help corporations and other businesses, and we can't forget about the workers," she said. "Our productivity has increased over the last 15 to 20 years, but wages have not paralleled that."

Favors acknowledged the added cost could be difficult for some small businesses to handle, but thinks most companies would be able to absorb it without a major negative impact.

Still, local videogame store manager Eddie Mercado said he'd have to slow his hiring if the minimum wage hit $9 an hour. Most of his employees already earn between $8 and $9 an hour -- but a $9 minimum mandate would force him to raise wages for all his employees, which would hurt his bottom line.

"If they get raised up to $9, then I have to take the people who are currently making $9 and pay them $11, then I have to raise those people, and so on," he said. "It's a trickle effect."

While only 3.8 million U.S. workers earn $7.25 an hour or less, raising the minimum wage would impact about 15 million workers, according to a release from the White House press office, in part because of the ripple effect.

Currently, a minimum wage worker earns about $15,080 a year -- $430 less than the 2013 federal poverty rate for a family of two. That would jump to $18,720 under Obama's proposal.

Sean Harrawood, who works part-time as a cook at Tubby's Real Burgers and part-time fixing cars, said he hopes the wage goes up. He earns $8 an hour at Tubby's.

"It'd help out with bills," the 23-year-old said. "I wouldn't have to stress as much about money. It would help me put gas in my car and take care of my son. Every dollar counts."