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Order Photos Aurora University sports information student worker Kevin Fitzgerald of Shorewood prepares media guides for mailing Friday. Aurora University employs more than 200 students and all positions are started at minimum wage. (H. Rick Bamman photo)

Restaurants affected most by wage increase

Best-selling author Barbara Ehrenreich earlier this month spoke at Aurora University about minimum-wage jobs, the kind of jobs that she chronicled in her investigative book “Nickel and Dimed.” But many of the college students in her audience might well have known about minimum-wage work.

Like most colleges, Aurora University employs more than 200 student workers in various departments, and all of them start at the minimum hourly rate – a figure that jumped in Illinois more than 15 percent to $7.50 an hour on July 1.

“We have made sure that we budgeted for the increase,” said Susan Brown, assistant director of human resources at the Aurora campus.

Minimum-wage jobs span a wide spectrum of industries, from education to hospitality to health care. In Illinois, a multi-year plan for increased minimums was meant to make life a “little easier for thousands of families to pay the bills, put food on the table or buy clothes for their children,” Gov. Blagojevich said.

Brown said school officials were hoping that they won’t have to cut back on student workers, but the increased rates are challenging some business owners and hurting hiring prospects for less-experienced workers.

The state’s plan would increase the minimum wage by an additional 25 cents each July 1 for the next three years, ending at $8.25 in 2010. This year, a full-time minimum-wage worker saw his or her yearly income increase to $15,600 from $13,520. By 2010, that would grow to $17,160.

About 60 percent of the nation’s minimum-wage earners work in the restaurant industry, and nearly three months into the state’s new minimum, business owners are facing pressure on their already thin margins from the rising prices of wholesale food, energy and employment.

“I feel as though we’re a heavyweight fighter and we just keep getting hit,” said Bill Linardo, board chairman of the Illinois Restaurant Association.

Low wages crucial for competition

David Bear, co-owner of South Elgin-based Bearco Management Co., which operates nine area McDonald’s restaurants, said the increase had hit restaurant owners hard. Food and labor are the two controllable costs in food service, and the state’s decision “artificially inflated” wages for the least experienced employees, Bear said.

“People who are earning minimum wage are getting basic job skills,” he said.

About 20 percent of the roughly 400 employees at Bearco’s  restaurants – located in Elgin, South Elgin, Streamwood, and West Dundee – are 14- to 18-year-olds who are learning initial job skills.

But with minimum wage increasing, making training more expensive, “we’re going to start demanding more,” Bear said, a result in line with the argument that a mandated wage increase most hurts the least employable.

A larger percentage of Bearco’s employees are mothers who work when their kids are at school.  Fast-food restaurants were not originally intended to be full-time employers, Bear said, but the flexible scheduling and health benefits have offered two major advantages to employees.

Restaurant owners who have absorbed the extra costs might be looking for profits elsewhere, such as in developing frozen food lines, or they might prune the payroll and trim hours. Others are likely to pass their costs on to consumers.

Bear said they could not afford to cut back on staffing.

“If we cut back on man hours, we’re not providing a good experience, which will ultimately hurt us,” he said. “People won’t come back.”

Employers can afford increase

The wage increase has what Linardo called a “trickle up effect,” pushing up the wages of the lowest-earning workers and the wages of those just above them.

But it’s too soon to compile real data on the effects of the increase. Ralph Martire, executive director of the Chicago-based Center for Tax and Budget Accountability, said the economic think tank would release a study on the increased wage’s effect on job patterns sometime next year.

Other states like New Jersey that have independently raised their minimum wage above the federal standard of $5.85 an hour have not seen a decrease in job creation, Martire said.

New Jersey would be especially vulnerable to losing business, considering its location in a highly competitive market with neighboring states.

Corporate profits, rather than workers’ wages, have benefited from increased efficiencies in recent years, and many employers have the cushion to pay the extra wages, Martire said.

Virginia Wilcox-Gök, associate professor of economics at Northern Illinois University, said increasing the minimum typically  does not have a large aggregate effect on the economy or employment. It may push up wages, but business owners often cut back on hours and overtime to compensate.

“On aggregate, it turns out to be much ado about nothing,” Wilcox-Gök said.

Paying for experience

In many cases, a local employer’s need for experience has a natural way of pushing up wages.

Carol Robbins, the owner of Robbins Flowers stores in Batavia and St. Charles, said she pays her employees more than minimum wage.

“We have to have employees who have knowledge dealing with customer service and dealing with flowers,” Robbins said.

Landscaper Steve Baier said he paid all his employees more than the minimum wage. The owner of A Natural Choice Shamrock Landscape in St. Charles, Baier said the work is hard and the pay is deserved.

“I just treat people the way I would want to be treated,” he said.

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