Business owners take a hit

Written by Dick Mason, The Observer January 04, 2013 09:54 am

Smokehouse Restaurant employee Michelle Richardson of Union prepares for the evening shift Wednesday. Jack and Tammy Chess, owners of the Smokehouse Restaurant said they take a financial hit almost every Jan. 1 when the state’s minimum wage is annually boosted. CHRIS BAXTER/The Observera
Smokehouse Restaurant employee Michelle Richardson of Union prepares for the evening shift Wednesday. Jack and Tammy Chess, owners of the Smokehouse Restaurant said they take a financial hit almost every Jan. 1 when the state’s minimum wage is annually boosted. CHRIS BAXTER/The Observer

Minimum wage increase comes at a bad time for some, others say they will boost prices to help offset expense 

The timing — in the eyes of Jack and Tammy Chess, owners of the Smokehouse Restaurant — is always far from perfect.

The couple take a financial hit almost every Jan. 1 when the state’s minimum wage is annually boosted. On Tuesday, an increase of 15 cents an hour took effect under a decade-old state law mandating that the minimum wage be boosted at the start of each year.  

The jump must match the previous year’s rise in the Consumer Price Index. The new minimum wage in Oregon is now $8.95 an hour. 

Jack Chess said the increase always comes at a bad time of year, one in which higher expenses are harder to absorb.   

“The timing couldn’t be worse. January is the slowest month of the year for us,” he said.  

The difficulty of the situation the Smokehouse Restaurant owners face is compounded by the poor economy.

 “They shouldn’t (raise the minimum wage) until it is known how good the economy will be,” Jack Chess said. “Because of the economy, we would like (the minimum wage) to stay the way it is.”

Jack Chess said that before the economy nose dived about 4-1/2 years ago, it was easier for he and his wife to handle the annual minimum wage increase.

“Before 2008, we could afford it,” Chess said.

Kathleen Hollingshead, a supervisor at Wendy’s in La Grande does not think that the increase really helps anyone because it causes all costs to rise, preventing the purchasing power of minimum wage workers from rising.

“It is pointless. Everything will stay the way it is (for minimum wage workers),” Hollingshead said. 

She said Wendy’s will soon be raising the cost of many items on its menu by 10 to 50 cents because of rising expenses fueled in large part by the minimum wage boost.

Wendy’s has 24 employees and all but but six are paid minimum wage. 

 

The Smokehouse has 12 employees, eight who are paid the minimum wage. The staff at the Smokehouse increases in the summer when business picks up significantly.

Tammy Chess estimates the latest rise in the minimum wage will cost her business between $2,500 and $3,500 in 2013. The increase will be due not only to higher wages but also the higher social security taxes and workmen’s compensation costs which rise for employers each time wages are boosted.

Beau Willadsen, owner of the La Grande McDonald’s, projects that his operating expenses for the local restaurant will jump $11,000 in 2013 due to the minimum wage boost. 

“It puts us all in a tough position,” Willadsen said. 

McDonald’s now has 25 employees  who are paid  at or near minimum wage and this summer will have about 50. Willadsen opposes the mandatory minimum wage increase, yet appreciates the arguments supporters of it make. He explained that he feels empathy for his employees and wants to help them. 

“I used to work for minimum wage. I understand how difficult it is to survive,” Willadsen said.

 Sandy Sorrels, the owner of Ten Depot Street, said that the wage increase will cost her an additional $6,000 a year in expenses. This means she will have to raise prices a small amount to cover the added costs of operating her restaurant.

Sorrels sees a touch of irony in the mandatory wage increase Oregon law requires. She said Oregon is one of the few states which requires tipped employees, such as waiters and waitresses, to also be paid full minimum wage. This means  waiters and waitresses  are often far less in need of minimum wage increases than others.

Sorrels said that Ten Depot Street waiters and waitresses receive about $20 an hour in tips. These waiters and waitresses make up almost all of Ten Depot Street’s minimum wage employees.

“Paying (the additional  money for minimum wage) is  painful because it only affects our highest paid employees,” Sorrels said.

Sorrels said the minimum wage increase does not prevent her from hiring additional employees when needed but it does slow her effort to keep her restaurant moving forward.

“We have to draw money from our improvement fund pool to pay for the minimum wage increase,” Sorrels said.

Price increases necessitated by the minimum  wage boost do not generate added revenue for about nine months, Sorrels said, since it takes customers this long to adjust to them and return to  their previous purchasing habits. 

Oregon’s minimum wage has increased almost every year since 2002 after voters passed Measure 25 in 2002. The state minimum was $6.50 a hour when Measure 25 took effect. 

A decade ago the average wage in Oregon was between 85 and 90 percent of the national average. A decade later this is still the case according to Charlie Mitchell, the City of La Grande community and economic development director. He also noted that Oregon’s poverty rate has not changed significantly.

Mitchell foresees a curious situation developing because of the minimum wage law should the economy continue to remain stagnant. He noted that currently the only people at many businesses receiving pay increases are those paid the minimum wage. 

This means that in a few years people receiving minimum wage will soon be making as much money as employees who once were receiving $1 or $2 more per hour more than minimum wage workers because they had additional experience and skills. This will create an awkward situation for employers, Mitchell said. .

Despite problems like this, the community and economic development director sees a need for the minimum wage and regular increases in it. Mitchell said there are always going to be entry-level workers with limited or no experience coming into the workforce to fill important needs.  

“They are going to need a fair wage,” Mitchell said.