The road to economic hardship is paved with good intentions.
That's what our legislature should remember as they debate whether to raise the state's minimum wage from $7.25 to $8.75. Although it may seem like a good idea for helping West Virginians, the truth is that it would harm the very people it's supposed to help.
First, let's take a look at West Virginia's restaurant industry, which employs close to 75,000 West Virginians. Our restaurants provide critical entry level jobs for thousands of West Virginians across the state. Many times our restaurants provide people with their first jobs and teach essential skills that help our workers succeed throughout their careers. Sometimes our restaurant workers stay within the industry and move up the ladder to higher level restaurant positions and other times they move on to different jobs in other industries.
Either way, the skills our employees learn from the restaurant industry, such as hard work, dedication and the importance of customer service, serve them well throughout their careers. Think about the number of people you know whose first job was waiting tables or working at their neighborhood restaurant. Restaurant industry jobs are an essential building block of our communities and our economy.
Additionally, restaurant jobs are among the most flexible in the workforce — you can take a part-time job at a restaurant while you are in school to help pay for your education. If you are saving up for something, you can pick up a few extra shifts to earn more money. Very few other industries can boast such flexibility.
Most of our businesses have profit margins in the 3 to 5 percent range. At the same time, our labor costs take up a third to a half of our budgets. Our restaurants that provide these crucial jobs can't afford a 20 percent increase in the minimum wage.
What would happen with such an increase in the minimum wage? A rapid increase in labor costs would eat up our razor thin profit margins and push us into the red. Once that happens, West Virginia's restaurants are no different than West Virginia's families — we all have to cut costs and make hard choices to stay afloat. Suddenly, many of the valuable jobs that our restaurants provide are in serious jeopardy.
But a minimum wage hike wouldn't just impact jobs. It would also undermine our state's economic competitiveness. Every state that borders West Virginia (except Ohio) currently sets their minimum wage at the federal level of $7.25. An $8.75 minimum wage would be the highest in the region. This would give all of our neighbors an economic advantage over us. And while our businesses suffer from burdensome new costs, businesses a mere foot across the state border will be able to offer sales and prices that we just can't match. Given these realities, it's no surprise that with its higher minimum wage, Ohio's unemployment rate is 7.5 percent, while ours is only 6.2 percent. We'd essentially be outsourcing our jobs to our neighboring states.
Furthermore, right now many parts of West Virginia are already dealing with the economic effects of the Elk River chemical spill, which forced many businesses to close for several days. For many restaurants, this meant thousands of dollars in unexpected lost revenue. A major minimum wage hike would be the second blow in a one-two punch.
Given our state government's current fiscal strains, we can ill afford any new government spending. Consider that the state's Division of Labor does not have enough capacity currently to administer this new minimum wage legislation and will have to increase its staff by at least 10 people to enforce this costly legislation. Also consider that according to the fiscal summary for the legislation, it would "exacerbate an already critical salary compression problem (of state employees)" likely leading to additional state employee wage increases and additional government spending.
For all of these reasons a steep minimum wage hike is the wrong policy at the wrong time.
That leaves one question that the legislature needs to answer: Why would you harm West Virginia's economy at a time like this? Clearly, our job creators and our citizens are already suffering enough. The last thing we need is for the legislature to make things worse.
Carol Fulks is executive director of the Food Division of the West Virginia Hospitality & Travel Association.