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Business owners across Ohio have been dealing with another minimum-wage hike since the start of the New Year, sparking a variety of reactions among businesses here in Athens.
On Jan. 1, the minimum wage jumped from $7.40 per hour for non-tipped employees to $7.70 per hour. For tipped employees, the rate went from $3.70 to $3.85.
The hikes are due to a state constitutional amendment passed by Ohio voters in November 2006 requiring the minimum wage to increase on Jan. 1 of each year by the rate of inflation.
A press release from the Ohio Department of Commerce states that the wage is tied to the Consumer Price Index for urban wage earners and clerical workers from September to September. That CPI index reportedly rose 4.3 percent between September 2010 and September 2011.
Tom Van Dyke, owner of The Pub at 39 N. Court St. said Friday that raising the minimum wage initially made sense but having it happen annually causes some trouble for small business owners.
"If inflation gets really rolling, it's going to get really hard on small businesses," he said. "I mean, what are you going to do if it gets up to $10 an hour?"
He said that many of the employees who make minimum wage are high school and college students earning some extra cash.
"We get to the point where I want to give my managers a raise, but I can't," he said, "because I just lost hundreds to a thousand dollars per week because everyone (else) just got a raise. Even the people who are just starting out."
He said that cutting hours is difficult in the hospitality business because it's hard to predict when it will get busy.
"My other question is, where is this money going to?" he said. "As your wages go up doesn't your Social Security and Medicare taxes go up also? So, half the money is just going right back to the government."
Van Dyke said that he doesn't believe that when voters passed the constitutional amendment that they realized it would be an automatic raise every year.
"Our big joke is, well first-of-the-year minimum wage just went up 50 cents, you go out to Walmart and milk just went up a quarter," he said. "So it self-perpetuates. So you've built inflation into the system. Wages go up; they pass it along to customers."
He said he worries that it will become unsustainable, but for now he has resisted hiking his drink prices. Though other bar managers declined to discuss the situation, several bars in uptown Athens raised drink prices in January.
Over at Bagel Street Deli at 27 S. Court St., employee Annastasia Chambers said that the business hasn't been impacted much by the hike in minimum wage because most employees already make more than that.
"We have about 20 employees but only, I think, maximum, five of them are at minimum wage," she said. "We do raises every other quarter. And the way that our owners have our pay set up is that any quarter that we do better in sales, we get raises. So no one here really works for minimum wage."
Tony Sylvester, owner of Tony's Tavern 7 W. State St., said Friday that because his employees are tipped, they fall into the lower wage but he still pays most of his people $5 per hour.
"As long as they're making minimum wage, it's OK," he said. "But it's not really a problem for me. They declare enough tips to get up to minimum wage."
Sylvester said that as the minimum wage increases, his employees have to declare more tips and he has matching-contribution requirements that he has to meet.
"But it really hurts the small business owner who doesn't have (the tip buffer)," he said. "So what it really does is it makes you hire full-time people… By raising the minimum wage they are eliminating part-time positions."
Sylvester said it's cheaper to pay one person full-time than two people part-time.
"I'd rather have one full-time person than one part-time," he said, because it cuts down on the employer-side contributions to Social Security, etc.
He said that small businesses have to adapt, and the end result will be a smaller workforce in that sector.
Looking to the future and the wage hike each year, Sylvester acknowledged he has some concerns. "There's going to be the law of diminishing returns," he said.
Ohio University offers a number of positions for students where they make minimum wage, and some have suggested that with so many local workers getting an increase in pay, they will spend more at local businesses and make up for the wage hikes for employees at those businesses.
Van Dyke was skeptical however, noting all of the unknowns in the bar business.
"Business here is cyclical anyway," he said. "The Pub will be hot one year because there is a whole group of people that comes. But then they all graduate and you have to build your crowd again. So you can't always stay on top."
He said that the bars have to build a crowd and often do so by offering drink specials.
"So you're having a special to get people in there, and your wages are here, and all of the sudden you're not making any money at all," he said. "So you can't do that for long. I think it will make places that aren't well run go out of business faster… Money doesn't just come out of thin air."
