Duvall & Associates, Inc.
BUSINESS ADVISOR NEWSLETTER
 

Wage increases will lead to price hikes

- by Alan Duvall 

Published in Dayton Daily News  January 7, 2007 

“Up, up and away!”  Superman? - No.  My beautiful balloon? - No.  Restaurant prices after passage of Ohio’s Minimum Wage increase – Bingo! 

Last November 7, Ohio voters enacted a constitutional amendment which, effective January 1, increases state employee minimum wage requirements from $5.15 to the new $6.85 an hour (33% raise).  Tipped employees’ hourly wages vaulted from $2.12 to $3.43 (60% raise).  

Ohioans simply felt a change was needed since the old federal-based minimum wage standard had remained stagnant since 1997.  However, the irony is the Ohio amendment may soon become largely moot if President Bush keeps his pledge to support a Federal minimum wage escalation to $7.25 an hour. 

Although an estimated 700,000 Ohio employees may be affected by the wage enhancement, many others will soon discover they will not benefit from its provisions.  Exemptions include children under the age of 16, owner-family employees and workers for businesses with sales less than $250,000.  The state may also grant business exemptions for employees with mental or physical disabilities. 

Ohio employers also face enhanced record-keeping requirements and must provide records to employees or authorized representatives upon written, notarized request. 

Ohio employees have rights to file employer violation complaints with the state and cannot be discharged or discriminated against as a consequence of such filing.  Employer penalties for disregarding the Act’s provisions can be severe and may include payment of three times back wages as well as reimbursement of employee litigation costs. 

Economists actively debate the long term financial effects of a higher minimum wage upon unemployment and Ohio’s competitive ability to attract new businesses.  But it is undeniable increasing business costs will force a responsive increase in prices.  Industries most affected will inevitably include restaurants, non-profits, health care providers and agricultural concerns. 

The ultimate problem is not the increase in wages, but the suddenness of the raise.  Companies have been granted only two months to react to a huge escalation in costs – a situation which could have been ameliorated if gradual cost of living increases had been instituted over the last ten years.  Recognizing this fact, Bush’s support of a minimum wage hike has been conditioned upon tax breaks to small businesses. 

“Just a spoonful of sugar helps the medicine go down.”  Mary Poppins. 

Alan Duvall is a certified public accountant in Dayton.  Contact him at Alan@Duvallcpa.com.