Wage jump comes in July - News

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Apr. 08, 2009
Copyright © Las Vegas Review-Journal

Wage jump comes in July

Some welcome, some fear hike in hourly pay

By JENNIFER ROBISON
LAS VEGAS REVIEW-JOURNAL

BOTH STATE, FEDERAL LAWS PLAY ROLE IN HIKES

Nevada’s minimum wage matched the federal rate until 2006, when Silver State voters passed a constitutional amendment establishing a new base rate that would rise every July 1 depending on either inflation or any federal wage gain, whichever was higher. The amendment set different minimums based on whether companies pay for health benefits.

Nevada adjusts its annual rate three weeks before the federal minimum resets, so the state always trails national increases.

The nation’s minimum rose 70 cents on July 23, to $6.55 an hour, and that is the increase that will push up Nevada’s minimum wage this coming July 1.

The state minimum for workers with health insurance is $5.85 an hour, but because federal rates supersede state wage laws, companies that cover insurance benefits should be paying $6.55 already, Nevada Labor Commissioner Michael Tanchek said. Several businesses do not know they are subject to the higher federal minimum and have not been paying it, he added.

More increases are on tap: The federal minimum will jump once more in late July, to $7.25, which means a 2010 increase to $8.25 an hour for businesses that do not pay insurance. Companies that do cover health benefits will have to pay $7.25 an hour.

Las Vegas Review-Journal

Matthew Terlep, owner of Kanani Foods, prepares cookers in the kitchen on Friday. Terlep says the minimum wage increase will add as much as 8 percent to his monthly payroll.
Photo by John Gurzinski.

A select group of Nevada workers soon will enjoy a 12 percent pay raise despite a recession that is paring wages for virtually everyone else.

No, we're not talking about policemen, firefighters or government workers and their oft-maligned compensation packages.

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We're talking about people who earn the state's minimum wage.

July 1 will bring a jump in Nevada's mandated base pay, a double-edged sword that could both give a helping hand to Nevada's neediest workers and bedevil bottom lines for businesses struggling with plummeting sales.

The lowest hourly salary Nevada law allows will jump 12 percent on July 1, from $5.85 to $6.55 for workers with company-sponsored health benefits. For employees without on-the-job health insurance, the pay floor will rise 10.2 percent, from $6.85 to $7.55 an hour.

"For those paying the minimum wage, it's a significant increase in payroll," said Brian Gordon, a principal in local research firm Applied Analysis.

At Kanani Foods, a Las Vegas wholesaler of sushi, salads, sandwiches and seafood, the pay raise could push up the company's monthly $35,000 payroll as much as 8 percent, said Matthew Terlep, owner and general manager.

Kanani cannot afford health coverage for its 18 full-timers, and it will face the $7.55 rate. Entry-level pay for probationary workers at Kanani starts at $7.50, not a big difference. But the hourly pay increase affects people who make more. Workers earning $9 and $10 an hour see lower earners reap a pay bump, and they expect one, too, Terlep said. It's a tough choice: Cough up bigger paychecks or lose good people.

It could all be a bit much for Kanani. The company has not had to lay off workers, but that could change if expenses rise as sales keep slumping 15 percent a quarter.

"My challenge today is just to stay in business," said Terlep, who has not drawn a paycheck himself in nearly three months. "The heyday of two or three years ago, those days are gone. For me, this (wage increase) is one more thing I have to consider. I have to figure out a way to stay competitive and bring in good people and have them feel like they're getting good pay for a good day's work. I wish I could pay everyone $20 an hour, but it's not possible."

Businesses are not sweating out the recession alone, though. Higher prices for energy, food and other essentials have made for tough times among consumers, said Launce Rake, a spokesman for Progressive Leadership Alliance of Nevada. That is why the wage raise is well-timed and important, he said.

"We want to put more money in the pockets of working families, who will almost certainly spend that money immediately, providing more bang for the buck to the economy," Rake said.

Researchers from a free-market think tank countered the minimum wage does not help workers any more than it bolsters businesses.

As the cost of low-skilled labor rises, it becomes cheaper for businesses to mechanize operations and fire unskilled workers, said Geoffrey Lawrence, fiscal policy analyst at the Nevada Policy Research Institute. And while some employees make more money, others lose their jobs.

"Basically, you're going to ensure some lower-skilled workers are going to be winners because they get to keep their jobs. It's like winning the lottery to some extent because there are others who will not have any employment at all," Lawrence said.

The most-recent studies show few Nevadans earn the minimum wage.

A fall 2006 report from Applied Analysis found that 5,700 Nevadans, 0.4 percent of the state's 1.3 million-worker labor pool, made that year's federal and state minimum of $5.15 an hour without commissions, tips, bonuses or overtime.

About 43,000 Nevadans, 3.3 percent of the state's work force, made $6.15, the proposed new state minimum in 2006, or less. The state's share of minimum-wage jobs probably has not changed substantially since, Gordon said.

But as Terlep said, the minimum wage doesn't just affect minimum-wage earners. Any employee within sniffing distance of the minimum pay -- say, $1 or $2 an hour above it -- could seek a raise.

That is likely to happen at Pro-Tect Security in Las Vegas. None of the security guards at the company earns less than $8 an hour, but workers who take home a little more than the new minimum will expect their wages to rise in proportion with the July increase, said Leslie Bruno, president and chief executive officer of Pro-Tect.

The state's overtime requirements will change July 1 too.

Expanded rules will require that companies providing health benefits pay overtime based on an eight-hour work day, rather than a 40-hour work week, to anyone making less than $9.83 an hour. Businesses that do not cover health benefits will have to pay daily overtime to workers earning less than $11.33 an hour.

Nevada is one of six states with a daily overtime requirement on top of a weekly mandate.

Overtime based on a single day rather than a week robs employers and workers of flexibility, Terlep said. It makes less economic sense for a company to let an employee work two or three hours extra one day to take two or three hours off the next day, for example.

At Pro-Tect Security, as much as 30 percent of the company's guards work overtime in the busier winter and spring seasons, Bruno said. Shelling out for additional hours every day could pinch the business. Sales have fallen 3 percent or so in the past year, and costs such as liability insurance have risen. Yet, the recession has forced Pro-Tect to freeze the rates it charges.

Kanani and Pro-Tect are adjusting to the higher expenses and the slumping economy.

Terlep has moved away from a reliance on Strip business and into arenas such as hospitals and schools, as well as convenience stores. Profit margins are lower, but diversifying Kanani's customer base should help the company survive, Terlep said.

Before she lays anyone off, Bruno will upgrade her marketing and advertising budgets in a bid for more business at hospitals, shopping centers and guard-gated communities.

But at some point, her customers will have to share her pain.

"The margins have always been fairly narrow in security, but now they're getting even tighter," she said. "It's going to be a squeeze. We can only absorb so much."

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.

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Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background. Passing the buck wrote on April 08, 2009 06:50 PM: Of course this amounts to another "indirect" tax on everyone, as business have to pass on the cost of doing business. Aren't our non-representatives representatives geniuses? You'll just have to continue to tighten your spending on the home front. taxpayers own alot of business' wrote on April 08, 2009 04:22 PM: tax payers get ripped off left and right and they own more business' than anyone technically helen weils wrote on April 08, 2009 03:33 PM: To Sally, you are sooo TYPICAL!!! The business owner ALSO pays an 8.6% match on the ss and medicare taxes that you do. They also get to pay a Nevada Head tax of 6% for the "priviledge" of hiring you. Add to that the constant pressure from employees for more insurance, more benefits, more vacation, more, more, more. It never ends. All for the priviledge of hiring some people who will unionize against you and picket if they pass the union card check. POX ON ALL OF YOU!!!!!!!11 Virgil A. Sestini wrote on April 08, 2009 01:23 PM: The Nevada legislature is in the process of trying to resolve retirement problems with PERS. The Chamber of Commerce, the resort-gaming interests, major businesses and others are joining forces to lobby to curtail and eliminate retirement benefits and funds of all Nevada state employees. The legislature has not zeroed in on the real problem with PERS which is the accumulation of overtime pay and other accrued special benefits within the state system. For instance, administrators in the CCSD receive overtime pay, vacation pay, sick leave pay, special health and insurance benefits; in addition, retired administrators are hired back into the district as mentors, specialists, consultants and for a sundry of other positions. CCSD administrators may retire with benefits earned from a six figure salary, but then can be re-hired for a special salary and benefits upwards from $70,000 for selected adjunct administrative positions. The adjunct salary contributes further to the administrator’s accumulated overall retirement package. Favored former administrators are rehired in the upper echelon of district administration to fill special positions. This is the way the good ole boy system works in the CCSD. What the legislature needs to do with all who contribute to PERS is limit what counts toward final retirement benefits. No state employee should be eligible to draw upon the system until they have vested a minimum of 10-15 years in the system. No one should be rehired to benefit from a second dose of retirement benefits once they quit the system. The latter situation is rendering PERS into a state of financial instability. roper again wrote on April 08, 2009 01:02 PM: Patrick, I agree people may be overall better off than 20 years ago, but you cut that time parameter down to 10 years and it is not the case. Corporate america has stifled the wages of most workers, the threat of taking peoples' jobs offshore gave them all the ammo they needed. Lower class people may have more material items than recent history, but thanks to subprime and careless lenders they also owe more than ever before as well. People bought into this notion that being able to obtain credit and purchase things once unaffordable was a boost to their standard of living. I think the present day situation has told us all how wrong that logic really is. I hear many stories of people with decent jobs going year after year with a wage increase well below the cost of living indices. Is that not taking them backwards rather than forwards? localguy wrote on April 08, 2009 11:30 AM: Quote: Patrick "That is nonsense. Even with the downturn life is better today than 2 decades ago. We can buy more goods than ever before. Things are cheaper, more and better goods are available. Today the poor in American own tvs, microwaves, coffee makers etc. Life is getting better, despite the governments best efforts to mess things up." === What does material possession have to do with anything. In the scheme of things, what matters is (Income - Cost of Living). Roper, couldn't have elaborated anymore clearly. A stagnance in median wage increases, coupled with inflation, and a rise in the cost of living index, quickly diminishes the boundaries of the two classes(low and middle-class). Now when the minimum wage goes up, something else has to go up, $$$price. That's the very reason why they are increasing the minimum wage, because the price of goods(gas, utilities, consumer goods,etc) HAVE gone up. Patrick wrote on April 08, 2009 11:08 AM: Neither do those who want to increase the minimum wage. In fact some supporters want the increase to keep out competition so their own wages stay up... Marcus wrote on April 08, 2009 11:07 AM: Whenever the RJ quotes press-releases from that high-octane think-factory, the Nevada Policy Research Institute, you know it's going after the big fish! Today it's a take-down of another over-privileged "select group of Nevada workers": the minimum wage dish washers and toilet cleaners. Is there anybody left in this state who ISN'T over-privileged and over-paid? Will tomorrow's editorial advocate shooting sweat-soaked Mexican landscapers out of palm trees in Summerlin because they make too much? greg wrote on April 08, 2009 10:36 AM: Here's my hunch; Not one of you blathering on about the increase in minimum wage lives at or near the poverty line.... HELEN WEILS wrote on April 08, 2009 10:35 AM: WHY OWN A BUSINESS? YOU HAVE A BUNCH OF LOSERS TELLING YOU HOW MUCH TO PAY THEM. I'VE DECIDED TO APPLY FOR FULL DISABILITY FOR STRESS FROM B.O. BEING THE PRESIDENT. WHY WORK WHEN YOU CAN LIVE OFF THE BACKS OF THE ONES THAT DO??? MY HUSBAND WILL TOO. SINCE HE'S ON SOCIAL SECURITY ALREADY BETWEEN THE 2 OF US WE SHOULD BE ABLE TO PULL DOWN MORE THAN WE ARE NETTING FROM RUNNING A BUSINESS. OF COURSE, I CAN DO A LITTLE BUSINESS ON THE SIDE AND TAKE CASH LIKE THE REST OF THESE DISABILITY RECIPIENTS DO. NET GAIN? NO WORK, NO STRESS, I'LL HEAD ON DOWN TO COSTA RICA IN MY MOTORCOACH WHERE I CAN LIVE ON FAR LESS THAN I DO HERE. THINK I'LL HIRE ME A LAWYER AND GIT ER DONE! HEY THE MESSIAH IS HERE! TIME TO GET IN THAT CHEESE LINE. HECK, EVERYONE ELSE IS DOING IT. WHY SHOULD I BE LEFT OUT??? WHERE'S MY CHECK????? Read All Comments