Low wage earners see two wins

By Liz Benston

Friday, Nov. 10, 2006 | 6:54 a.m.

Nevada's lowest wage earners may have scored twice this week, winning not only voter approval that sets a state minimum wage at $1 over the federal minimum, but likely benefiting by the election of a Democratic-controlled Congress that will look more favorably on raising the federal minimum wage.

The financial victory for cooks, dishwashers, sales clerks and others who make low wages will come at the expense of business owners who, by their estimate, may have to shoulder costs in excess of $1 billion over time.

The primary benefactors of the passage of Question 6 are fast-food and restaurant workers who earn minimum wage without the hefty tips that are a significant chunk of casino workers' take-home pay.

But the Nevada Restaurant Association, which led the opposition to Question 6, says the initiative - which won initial voter approval two years ago and was affirmed on Tuesday - could have a devastating ripple effect on the entire Nevada economy as businesses cut costs to meet the rising expenses incurred by the new wage requirements.

Question 6 requires that Nevada's minimum wage be $1 higher than the federal minimum wage, which is $5.15 an hour.

Businesses would be exempt if they provide health benefits in lieu of the pay raise.

That exemption may never be used because most businesses would rather swallow a $1 increase than pay for health coverage, which is far more expensive, said Danny Thompson, executive secretary-treasurer of the Nevada AFL-CIO.

He said the pay increases will benefit not just the workers who struggle to make ends meet, but the local economy.

"They're not going to put that money in a Swiss bank account. They are going to spend it and they are going to spend it right here in Nevada. It's going to benefit the economy, like it has in other states that have raised their minimum wage."

Estimates vary on the number of workers who earn minimum wage in Nevada.

A study commissioned by the Nevada Restaurant Association and supported by major chambers of commerce estimated that fewer than 6,000 workers statewide - less than 1 percent of the workforce - earn only minimum wage. According to the study, by Applied Analysis, about 43,000 people will be affected to some degree, because they earn up to $6.15 per hour and would benefit from the $1 increase over the current $5.15 federal minimum.

The Nevada AFL-CIO, however, estimates that closer to 100,000 workers earn up to $6.15 per hour.

The bigger financial hit for employers, Applied Analysis said, will come if wages increased to more than $8 an hour, affecting more than 20 percent of Nevada's hourly workforce and triggering wage increases among workers earning just above that.

With Democrats taking control of Congress, a previously contemplated increase in the federal minimum wage to more than $7 an hour is likely, said Kara Kelley, chief executive of the Las Vegas Chamber of Commerce.

If that happens, Kelley said, Nevada's rate could rise to $8.15 or more an hour - among the country's highest.

Overshadowed by the more controversial ballot initiatives, including possession of marijuana and smoking in bars and restaurants, Question 6 is notable for the fact that Nevada's biggest industries - gaming and construction - did not weigh in. Those industries supposedly were unaffected because they generally offer health coverage or pay more than minimum wage.

But Kelley says more businesses should be concerned now that Nevada's minimum wage - unlike the vast majority of states without constitutionally mandated wage rates - is outside of the Legislature's control.

"I don't think you're going to have massive layoffs and disaffected workers. But the more important aspect of this is the long-term effect on the Nevada economy, on the creation of jobs and job options for low-skilled workers," she said. "And that's a hard message to get out."

While Democrats have pledged to increase the federal minimum wage, Thompson said, it's also a good bet that President Bush will veto any major increases.

"I just don't see that the sky is falling," he said. "The minimum wage in California is $8 per hour, and those businesses aren't running kicking and screaming out of California. At the end of the day, it's going to create a level playing field for employers."

Restaurant owner Bob Ansara says it's not that simple.

Like many restaurants around town, Ricardo's Mexican Restaurant on Flamingo Road pays back-of-house workers more than minimum wage, while servers earn $5.15 an hour.

But the servers make about $10 an hour in tips, meaning their take-home pay is more than the dishwasher earning $8 an hour.

A $1 increase in hourly wages will cost Ansara's restaurant about $65,000 per year, although he is braced to pay more than $100,000 based on an increase in the federal minimum wage to at least $7.15 an hour.

Ansara said he will reduce some workers' hours, increase menu prices and attempt to cut overhead to cover the cost.

"Every business has an equation (to make a profit), and our equation was scrambled. But we'll make it work."