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Next round of minimum wage increases takes effect
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Forsyth County News
About 1.7 million people received a 70-cent raise Thursday.

The pay bump from $5.85 an hour to $6.55 an hour is due to a federal law raising the minimum wage by 70 cents every year from 2007-09.

The combined $2.10 over the three years is nearly a 41 percent increase over the $5.15 an hour minimum wage workers had received for more than 10 years prior to the staggered increases.

When the increase from $5.15 to $5.85 took place July 24 last year, workers may have been excited to add about $1,500 a year to their full-time earnings. Employers, however, were not as enthusiastic.

"When you have a wage increase like this, I will assure you that you don't see a simultaneous increase in performance," said Mike Ridzone, owner of a Chick-fil-A franchise in Cumming.

"Frankly, if a person's doing a good job, you want to reward that person and hang onto that person, and that's going to naturally occur," he said. "Government does not have the right to get involved in it through dictating minimum wage."

The majority of Ridzone's workers making minimum wage are teenagers, as are many minimum wage employees nationwide, according to U.S. Department of Labor statistics.  

Businesses with minimum-wage employees have to pay more for labor, so sales must increase to compensate for the cost.

That can force businesses to make difficult decisions, including shifting the cost to consumers, cutting employees or taking a loss, Ridzone said.

"I think it's going to work counterproductive, to a point where if you had a marginal employee and you are trying to work with that person ... with the economic downturn like this, there's no room for slackers," he said.

"In today's environment, there's not enough opportunity out there for job hopping. And for that person who's never been through an economic downturn, if they don't perform, they're going to lose their job, and may not find another one out there."

With the state of the economy, experts say it's hard to judge whether the end result of the wage increase has been beneficial.

Roger Tutterow, professor of economics at Mercer University, said the great minimum wage debate will continue.

Those against increasing minimum wage, he said, "would suggest when you put in a price floor ... that you create distortions in the market. Theoretically, you may actually get a reduction in employment from a minimum wage.

"However, offsetting that is the argument that the workers that do have jobs, get a higher income, and therefore have more money to spend in the community."

Another consideration: while only a small percentage of workers make minimum wage, increasing the minimum only creates pressure for workers making slightly more than minimum, to push for an increase.

With the current economy and scarcity of jobs, Tutterow said this argument may not hold as much water.

"With job creation stalling, workers are probably in less of a favorable position to press for wage increases this year than they may have been in the past," he said.

By in large, those making minimum wage are in the fast food and hotel cleaning staff industries, said John Heavener, spokesman for the Georgia Retail Association.

The increase will affect the bottom lines of restaurants, he said, as they're "not as busy as they were, because people have less disposable income right now."

"We've seen across the business model ... cutbacks, not only on hourly, but also on management staff," he said.

"We have pressure to keep profits reasonable, or keep profits period and a lot of businesses are facing deficits. There's pressure from both ends right now."