• President Obama promised to try to raise minimum wage to $10.10.
• Professor of economics says this could lead to fewer jobs in Muncie.
• Local businesses say they may have to fire employees.
President Barack Obama’s call for a raise in minimum wage has left one Ball State professor doubtful and local businesses in varying degrees of concern.
During Obama’s annual state of the union address on Jan. 28 he asked Congress to “give America a raise” by increasing minimum wage.
He promised to raise it to $10.10 for federal workers by executive order,, which he will follow by pressuring congress to pass a bill that would increase wages for non-federal workers over the next three years.
Michael Hicks, director of Center for Business and Economic Research, said chances are slim that the legislation will pass and if it does, it is a political, not an economic decision.
“The probability of [a minimum wage bill] actually happening is one in a billion,” Hicks said.
Jacob Layton, a student facility monitor for the Ball State Recreation and Wellness Center, verbalized many peoples’ fears when he said raising the minimum wage is a temporary solution.
“In raising the minimum wage, people will have more money to spend or save,” Layton said. “But because people will get paid more, the prices for everything will increase.”
However, Hicks said if minimum wage were increased, it would cause little impact on the price of consumer products.
“Consumers would see a trivial change in products, while it may cause people to lose or not be able to find new jobs because of the value of minimum wage,” he said.
One sector that could see a drastic change is the food service industry.
“Quality of service will decline and those workers will have to be more productive,” Hicks said. “You don’t just go from $7.25 to $10.10 an hour without being able to do more.“
At Grandma Betty’s Ice Cream Shop, owner Jeannie Lee Lake said businesses are supposed to be able to pay workers a rational wage and that the current minimum wage is too low. Lake Lee’s business employs few people as it is, most of them being students.
“It would affect the number of paid employees we have. I hope it wouldn’t [but] obviously [$10.10] is a significant amount,” she said.
The abundance of college students looking for jobs in Muncie means there are often more people looking for low-skill jobs than are available. A minimum wage increase would only worsen the problem.
“Most businesses are going to say, ‘I’m going to shift to more professional staff,’” Hicks said. “If I have to pay someone 30 percent more, they need to be 30 percent better.”
A more professional staff in this instance would mean a shift to full-time year-round local workers versus students who are only here for a portion of the year, Hicks said.
“Students from outside the area may find it harder to get a job,” he said.
Layton said he wasn’t too worried about losing his job at Ball State.
“They’re going to need as many people as they need now,” he said. “If they do eliminate positions, I’ll probably be one of the first since I just started working here and they don’t know me as well.”
Karen Fisher, owner of the Artmart of Muncie, said raising the minimum is a wonderful idea but isn’t feasible and could threaten her business.
She said a nearly $3 increase in wage each hour would mean she would have to fire some of her staff.
“I don’t think I would be able to employ the students that I employ now if I had to pay everyone that amount,” Fisher said. “I think we would end up losing some employees, and since we hire students, it would be student employees.”
The university has not taken a position on the issue of minimum wage as proposed by Obama’s annual state of the Union Address.
“It is too early to speculate on proposed and/or pending government legislation,” associate vice president for human resource and administrative services, Marie Williams said.
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