Minimum wage increase may help workers, hurt employers

August 23, 2008|By ARNOLD S. PLATOU

WASHINGTON COUNTY -- When Paula Hamby got her paycheck late last month and saw she had received a nearly 12 percent increase, she was really happy.

Her pay had jumped 70 cents to $6.55 per hour.

But the latest increase in the federal minimum wage that has so delighted the 55-year-old Hagerstown woman also is the latest economic blow to many employers.

"For the restaurant industry, this is a perfect storm situation," said Melvin Thompson, vice president of government relations for the Restaurant Association of Maryland. "We have especially significant increases in labor costs as a result of the minimum wage increase."

Plus, he said, "we're getting fewer customers in the door as a result of the slowing economy, as well as significant increases in food costs as a result of federal government mandates that convert more of our corn crop into ethanol production ... and a lot of suppliers have been tacking on the fuel surcharges, so delivery costs have gone up as well."


Judy Arthur, branch manager in Hagerstown for the Labor Ready jobs agency, said she has talked to many employers worried about staying in business.

"Lot of times, I'm giving them a pep talk," Arthur said. "You know, 'It's going to get better.'" She said she does believe the economy will rebound after the presidential elections, but "right now, people are kind of in a state of panic."

Not all sectors are weakening, said Kim Flannery, branch manager at Manpower in Washington County.

The 25 to 30 local companies she surveyed in May and June reported a largely positive outlook for July, August and September, she said.

"What that told us for the third quarter of this year is that things were looking good for the Hagerstown area," Flannery said. Bolstering that has been the arrival of National Golden Tissue, a manufacturing plant in Hagerstown, and Kellogg's, a warehouse distribution center, near the city, she said.

The temporary route

But what has changed is that many companies are hiring workers more hesitantly, going more often with temporary employees, both Flannery and Arthur said.

"What we're seeing is companies calling when they're going to need workers for a project, ones that are not going to keep workers for a long time," Flannery said.

It's the emotional side of having to let workers go as well as dealing with unemployment issues that companies rather would leave to a job agency, she said.

In addition, the job market has been sandbagged by the dramatic slowdown in home construction, Arthur said.

"Residential construction is way down, which means building supply companies are down, which means they may use us more because they lay off, and then when they have a surge in business, they call us," Arthur said.

"I'd say it's been six to nine months, maybe more," Arthur said. "Been a lot of layoffs in this area. Furniture (sales) get slower. Building supplies get slower. Hardware gets slower. Retail and restaurants get slower."

"Employers are afraid of what's happening," Flannery said. "They're basing their work-force needs on their projections, so if a distribution center is anticipating 100,000 units coming in, they're going to have to create a work force to handle that.

"Well, if something happens for whatever reason -- they've misjudged or people aren't spending as they used to -- they may be in a situation where they're laying people off."

Craig MacLean, CEO and executive director of Horizon Goodwill Industries based in Hagerstown, said he's seeing some of the same sort of caution among employers that his nonprofit agency looks to to hire people it is training to help find work.

He said employers seem "not a whole lot yet" slowed by the July 24 increase in the minimum wage, but "they're also looking at, 'Can I squeeze by without hiring more?'

"And if you couple that with the general state of the economy, the energy, there are all kinds of reasons for the employer to hunker down here and weather it out. I think we're all waiting for the other energy shoe to drop."

'It's tough out there'

Flannery said she is seeing a lot of economic shock among people who have been laid off.

"We do see more folks walking through our door and, like I say, that's where you see the panic," Flannery said. "They've just been laid off and they've got children to feed.

"These are like people who have worked in a mortgage company, finance people. Admin types who have worked in banks. HR (Human Resources) assistants, we're seeing those HR assistants coming in here.

"It's tough out there for people. If somebody's got a mortgage (employment) background, we've got to retrain those folks. 'OK, what do you like to do? Would you like to be a receptionist?'"

Hamby would like that kind of work, anything in the way of secretarial work.

A longtime Hagerstown resident, Hamby worked as a cook for about 12 years before health problems put her on disability. She now is working at Goodwill, tagging and hanging items donated for sale in its area stores, and she soon will begin training for office work.

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