The summer is over and as the nights and days get colder outside, it is time to stop working on Doe Valley and time to start solving the world’s problems again. So after a few months of physical work, the mental work has begun again.
I want to continue on with my previous post about raising the minimum wage in Pennsylvania. As you may or may not know, PA did pass the increase in minimum wage bill. The minimum wage will increase to $6.25 an hour on January 1, 2007 and will increase to $7.15 an hour on July 1, 2007.
As stated in my previous post (see Minimum Wage Increase in PA, February 16, 2006), raising the minimum wage in Pennsylvania will hurt those workers that need the jobs and the money the most.
An article, written by staff writer Harry Evans, was published in “the Advocate” (Volume 78, Issue 2 – September 20, 2006), the student newspaper of the University of Pittsburgh at Johnstown regarding the minimum wage. According to the article there is about an 8% to 10% decline in the jobs that are available due to the minimum wage increase.
What have we learned? Again, please review the February 16, 2006 post for more information, but the laws of supply and demand hold true. Wages are to increase by 20% and jobs have already decreased by 10% in this example.
Eventually, prices of goods and services will rise to cover the cost of the increase in minimum wage, even in non-minimum wage positions. This is partially due to the spill over effect. For example, there are many people that are currently making more than minimum wage, however, when the minimum wage increases, the employer will probably need to increase the wages of those people in order to keep the workers from leaving for another (now) minimum wage position.
Many school districts are faced with the same problem. Many aides work during the 9- month school year for wages slightly above the current minimum wage of $5.15, however, they get to enjoy excellent year long healthcare and retirement benefits. What will happen to them? School districts are non-profit organizations. They get their money from the government, which gets its money from taxing the people (in particular property taxes). The school districts are left with few options. They are required to pay the new minimum wage, so that will increase their costs. The only way to cover these increased costs is to either raises taxes (which is now limited by Act 1) or cut costs. What is the biggest cost to a school district (as well as most organizations)? Salaries and benefits! The school districts will be forced to not hiring as many people or cut benefits to people or cut positions. However, there is another catch! Certain state and federal mandates limit class size or they are proposing to limit class size. So they can’t get rid of people, now they must cut benefits. Once this occurs, many staff people will no longer be interested in working for low pay and low benefits in a 9-month position. The school districts will be forced to hire less qualified and possibly less enthusiastic or desirable workers. This situation is not good for the school districts, the students or the future of Pennsylvania!
But, I digress. I have been informally observing the price of several select products (bread, doughnuts, and pizza for example). There has already been a slight increase in the price of those products. I would expect when the minimum wage goes into effect we will see more slight increases in those products.
Do you think the price of gas in PA is still too high, even though it has dropped about 40 cents per gallon in the past few weeks? Wait until the gas attendants, which are usually minimum wage positions or slightly above minimum wage, get a 20% raise in January and then another 15% raise in July! Obviously, this will cause the gas stations to occur higher costs. Do you think they will just absorb the cost or pass it on to the consumers?
It will be interesting to see how this all plays out. I truly believe this was simply a ploy for the politicians to get reelected this November. In all likelihood, the federal government will be raising the minimum wage to $7.15 an hour, negating the PA increase and leveling the playing field among other states. But by that time, the PA politicians will have been reelected and will probably only be focused on raising their own wages!
Just remember, you read it here first!