Some of Nevada's neediest workers will receive a pay raise come Thursday, but experts disagree on whether the increase will help the economy.
Nevada's hourly minimum wage is set to jump 70 cents, or 9.3 percent, on Thursday, from $7.55 to $8.25 for workers who don't receive health benefits through their employer. For workers with company-sponsored health insurance, the minimum will rise 10.7 percent, from $6.55 to $7.25.
Credit the increases to a referendum Nevada's voters passed in 2006. The law pushed the Silver State's minimum wage for uninsured workers $1 per hour higher than the federal rate, and required Nevada's base wage to rise every July 1 based on either inflation or any federal wage hike -- whichever is higher. The federal minimum rose last summer to $7.25.
For companies that don't provide insurance, the state's minimum wage has risen $3.10 an hour since 2006, when it started at $5.15.
Today's economy looks very different from the boom times in which the law passed, though. Unemployment has surged from around 4 percent to 14 percent, and taxable sales have tumbled 50 percent. The higher minimum means help for cash-strapped locals facing cuts in hours worked, but it will also yield a "piling-on effect" for companies already struggling to keep staffs fully employed as sales continue to slide, said Jeremy Aguero, a principal in local research and consulting firm Applied Analysis.
"It certainly provides an additional amount of income to select workers, but on the other side, it's making it more difficult for businesses to make ends meet and compounding already difficult problems for them," Aguero said.
Added Bob Ansara, director emeritus of the Nevada Restaurant Association and owner of Ricardo's of Las Vegas on West Flamingo Road: "This is of significant consequence to businesses who are staying alive in a very tough economy. In some cases, it'll put people out of business. In other cases, prices will rise."
The Employment Policies Institute in Washington, D.C., cited a recent study from Ball State University blaming federal minimum-wage increases from 2007 to 2009 for the loss of 310,000 teen jobs nationally. Teen unemployment is now 34.6 percent in Nevada, and that jobless rate could worsen with additional increases in the minimum wage, said Michael Saltsman, a research fellow at the institute.
But Jan Gilbert, Northern Nevada coordinator for advocacy group Progressive Leadership Alliance of Nevada, said there's abundant national research showing that raising the minimum wage doesn't cost jobs, and such pay increases actually stimulate the broader economy. A 2009 report from the Economic Policy Institute found that boosting the federal minimum wage to $7.25 would generate $5.5 billion in additional consumer spending over a year.
"I think there's kind of a Chicken Little, 'sky-is-falling' reaction," Gilbert said. "If anything, what an increase really does is increase consumers' buying power, reduce costly employee turnover, raise productivity, increase consumer satisfaction and improve the reputation of companies. A raise is a benefit to our economy. It's more money being spent in our economy."
So how many Nevadans will the law affect? Current numbers are tough to come by. But a 2006 study from Applied Analysis pegged the ranks of minimum-wage earners who truly earn only the bottom rate -- with no additional compensation from tips, bonuses, overtime or commissions -- at 5,700 workers out of a statewide workforce of 1.3 million. That's 0.4 percent of the labor pool. Workers earning less than the pending minimum of $8.25 an hour totaled 143,600 people, or 11 percent of the workforce. Bringing those workers up to Thursday's scheduled minimum would mean an additional $328 million in annual payroll, the firm estimated at the time.
Aguero said the company doesn't have more recent data, but the state's number of minimum-wage earners has likely increased simply because the rate's floor has risen.
Still, the vast majority of minimum-wage workers in Nevada continue to collect tips, bonuses and other sources of income, and wages near the low end of the pay scale tend to inflate when the minimum wage increases. That means someone earning $8.25 an hour now will likely receive a pay bump once the new floor takes effect, thus keeping his earnings ahead of the minimum wage. Ansara estimated that 40 percent of hourly workers who make more than the minimum wage will see their pay jump following a boost at the bottom. So minimum-wage earners will likely continue to make up a very small portion of Nevada's work force, observers said.
That's why Gilbert foresees little fallout from the wage boost. In most states, minimum-wage earners equal roughly 5 percent of the population -- too small a group to force widespread budgetary woes for businesses, she said.
To grapple with past increases, Ricardo's cut hours for busing staff and reduced the number of assistant servers from one helper per server to one helper for every two servers (the cuts came through attrition).
Ricardo's won't need to adjust its operational model this time around, because the company spends $60,000 a year on employees' health insurance, and it qualifies for the lower minimum wage as a result. Other businesses can't afford health insurance or higher wages, though, and the increases don't always help the neediest workers, Ansara said.
"I've got people here earning $25 an hour in tips, and this law forces me to give them a raise," he said. "And I've got people making $9 an hour and I can't afford to give them a raise. The idiocy of it is, the very people it's designed to help, it hurts."
Overtime requirements will also change on July 1. The state will require companies to pay overtime on a daily, rather than a weekly, basis for insured workers who make less than $10.875 an hour, and uninsured workers earning less than $12.375 an hour. That's up from $9.825 and $11.325 in July 2009.
Contact reporter Jennifer Robison at jrobison@review journal.com or 702-380-4512.