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July 29, 2012

xpert: Indiana minimum wage of $7.25 per hour won’t change soon

LAFAYETTE — Hoosiers who make the minimum wage shouldn’t expect that to change anytime soon.

As the nation this week marked the three-year anniversary of the federal wage’s last increase, an Indiana expert said the state’s new right-to-work legislation doesn’t bode well for any increase.

The state’s minimum wage, commonly earned by workers in the food-service and retail industries, is the same as the federal rate — $7.25 per hour — and is lower than most surrounding states’ rates.

“The chances of Indiana increasing its minimum wage, as a result of history and the fact that unions are so weak, is very unlikely,” said Michael Thompson, who studied the matter in 2008 when he was an economic analyst at the Indiana Business Research Center at Indiana University’s Kelley School of Business.

Full-time minimum wage workers in Indiana who work 50 weeks per year would earn $14,500 per year. Tippecanoe County’s per capita income in 2010 dollars is $22,203, according to census data.

Of the 1.73 million Indiana workers who were paid hourly rates last year, 108,000 of them were paid at or below the minimum wage level, according to the Bureau of Labor Statistics.

A spokesman for Indiana’s Department of Workforce Development said the data is not localized by county or metropolitan area.

Indiana wage increase activity usually models what happens at the federal level, where legislators infrequently act on the matter, said Thompson, who now is an assistant professor of sociology at Grinnell College in Iowa.

States that increase their wages faster tend to be more labor movement-focused, Thompson said.

Indiana’s newly enacted right-to-work law is a signal that the state might be in the slower pack, although strong unions aren’t always correlated with more frequent minimum-wage raises, Thompson said.

Samantha Griffin, a barista at J.L. Hufford Coffee and Tea in Lafayette, said she thinks the minimum wage is better than it used to be.

Griffin was paid $5.85 per hour — Indiana’s minimum wage in 2008 — when she joined the workforce. She now makes $8.50 per hour, plus about $5 per shift in tips.

“I think it’s a pretty good rate for someone starting off who is my age,” Griffin, 21, said. “If you’re older and you have a family, not so much.”

Single mother Amber Eldridge of Frankfort said she is unemployed and seeking work. Eldridge has applied to work mostly at retail jobs paying minimum wage.

“As a mother, I put my child first,” Eldridge said. “You have diapers and other expenses (that you don’t have) if you’re a college student. It should be a little more. I’m going to have to seek help from the government with a minimum wage job.”

A popular argument for keeping the wage stagnant is that it might hurt small business or drive away employers, Thompson said.

But most of the nation’s largest low-wage employers are big corporations with more than 100 employees, and 92 percent of the top 50 low-wage employers were profitable last year, according to findings from a new analysis from the National Employment Law Project.

Thompson’s study, which focused on Illinois-Indiana border activity, showed there was no negative impact on the Illinois side when it raised its minimum wage past the federal level.

“By the time the federal minimum wage went to $5.85, Illinois was already up at $7.50,” Thompson said. “I looked at counties on the border, where you would drive just a few miles and the Illinois McDonald’s is paying more. There was no loss of jobs on the Illinois side.”

That conclusion prompted Thompson to study the difference between the living wage and the minimum wage.

“They’re so worried about the negatives, that if you change the minimum wage too much, too quickly, it could hurt some small businesses,” Thompson said.

“But the positive side that gets lost in the debate is that it really would help low-wage people. If they could just get paid a living wage, then people would be able to pay for their everyday living. It would reduce poverty, or at least has the potential to.”

Thompson said the sluggish economic recovery has not stopped the compensation of top executives from rising.

“There’s no maximum wage,” Thompson said. “Top-level wages continue to soar, whereas minimum wage hasn’t increased in three years.”

Ryan Fletcher, a minimum-wage employee at New Age Spirit in Lafayette, said he thinks the current rate makes sense for employers.

“It is needed as a building block for employers,” Fletcher said. “But they should pay more attention to giving raises over time that they can use as incentives for good work. It’s nice to go up.”

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