Wage jump comes in July

A select group of Nevada workers soon will enjoy a 12 percent pay raise despite a recession that is paring wages for virtually everyone else.

No, we're not talking about policemen, firefighters or government workers and their oft-maligned compensation packages.

We're talking about people who earn the state's minimum wage.

July 1 will bring a jump in Nevada's mandated base pay, a double-edged sword that could both give a helping hand to Nevada's neediest workers and bedevil bottom lines for businesses struggling with plummeting sales.

The lowest hourly salary Nevada law allows will jump 12 percent on July 1, from $5.85 to $6.55 for workers with company-sponsored health benefits. For employees without on-the-job health insurance, the pay floor will rise 10.2 percent, from $6.85 to $7.55 an hour.

"For those paying the minimum wage, it's a significant increase in payroll," said Brian Gordon, a principal in local research firm Applied Analysis.

At Kanani Foods, a Las Vegas wholesaler of sushi, salads, sandwiches and seafood, the pay raise could push up the company's monthly $35,000 payroll as much as 8 percent, said Matthew Terlep, owner and general manager.

Kanani cannot afford health coverage for its 18 full-timers, and it will face the $7.55 rate. Entry-level pay for probationary workers at Kanani starts at $7.50, not a big difference. But the hourly pay increase affects people who make more. Workers earning $9 and $10 an hour see lower earners reap a pay bump, and they expect one, too, Terlep said. It's a tough choice: Cough up bigger paychecks or lose good people.

It could all be a bit much for Kanani. The company has not had to lay off workers, but that could change if expenses rise as sales keep slumping 15 percent a quarter.

"My challenge today is just to stay in business," said Terlep, who has not drawn a paycheck himself in nearly three months. "The heyday of two or three years ago, those days are gone. For me, this (wage increase) is one more thing I have to consider. I have to figure out a way to stay competitive and bring in good people and have them feel like they're getting good pay for a good day's work. I wish I could pay everyone $20 an hour, but it's not possible."

Businesses are not sweating out the recession alone, though. Higher prices for energy, food and other essentials have made for tough times among consumers, said Launce Rake, a spokesman for Progressive Leadership Alliance of Nevada. That is why the wage raise is well-timed and important, he said.

"We want to put more money in the pockets of working families, who will almost certainly spend that money immediately, providing more bang for the buck to the economy," Rake said.

Researchers from a free-market think tank countered the minimum wage does not help workers any more than it bolsters businesses.

As the cost of low-skilled labor rises, it becomes cheaper for businesses to mechanize operations and fire unskilled workers, said Geoffrey Lawrence, fiscal policy analyst at the Nevada Policy Research Institute. And while some employees make more money, others lose their jobs.

"Basically, you're going to ensure some lower-skilled workers are going to be winners because they get to keep their jobs. It's like winning the lottery to some extent because there are others who will not have any employment at all," Lawrence said.

The most-recent studies show few Nevadans earn the minimum wage.

A fall 2006 report from Applied Analysis found that 5,700 Nevadans, 0.4 percent of the state's 1.3 million-worker labor pool, made that year's federal and state minimum of $5.15 an hour without commissions, tips, bonuses or overtime.

About 43,000 Nevadans, 3.3 percent of the state's work force, made $6.15, the proposed new state minimum in 2006, or less. The state's share of minimum-wage jobs probably has not changed substantially since, Gordon said.

But as Terlep said, the minimum wage doesn't just affect minimum-wage earners. Any employee within sniffing distance of the minimum pay -- say, $1 or $2 an hour above it -- could seek a raise.

That is likely to happen at Pro-Tect Security in Las Vegas. None of the security guards at the company earns less than $8 an hour, but workers who take home a little more than the new minimum will expect their wages to rise in proportion with the July increase, said Leslie Bruno, president and chief executive officer of Pro-Tect.

The state's overtime requirements will change July 1 too.

Expanded rules will require that companies providing health benefits pay overtime based on an eight-hour work day, rather than a 40-hour work week, to anyone making less than $9.83 an hour. Businesses that do not cover health benefits will have to pay daily overtime to workers earning less than $11.33 an hour.

Nevada is one of six states with a daily overtime requirement on top of a weekly mandate.

Overtime based on a single day rather than a week robs employers and workers of flexibility, Terlep said. It makes less economic sense for a company to let an employee work two or three hours extra one day to take two or three hours off the next day, for example.

At Pro-Tect Security, as much as 30 percent of the company's guards work overtime in the busier winter and spring seasons, Bruno said. Shelling out for additional hours every day could pinch the business. Sales have fallen 3 percent or so in the past year, and costs such as liability insurance have risen. Yet, the recession has forced Pro-Tect to freeze the rates it charges.

Kanani and Pro-Tect are adjusting to the higher expenses and the slumping economy.

Terlep has moved away from a reliance on Strip business and into arenas such as hospitals and schools, as well as convenience stores. Profit margins are lower, but diversifying Kanani's customer base should help the company survive, Terlep said.

Before she lays anyone off, Bruno will upgrade her marketing and advertising budgets in a bid for more business at hospitals, shopping centers and guard-gated communities.

But at some point, her customers will have to share her pain.

"The margins have always been fairly narrow in security, but now they're getting even tighter," she said. "It's going to be a squeeze. We can only absorb so much."

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.