Economists: Raising minimum wage would affect local businesses

During the State of the Union address Tuesday night, President Obama called on Congress to raise the federal minimum wage from $7.25 an hour to $9.

Economists said it’s a proposal that would increase the earnings of low-wage workers across the country.

Alan Reed, president of Reed’s Dairy in Idaho Falls, said the dairy often hires teenagers looking for after school or summer work.

Reed said paying them $9 an hour to scoop ice cream just isn’t feasible.

“The students do such a wonderful job and we like them here, but it’s hard to pay them at that level to start with,” said Reed.

Reed said it’s difficult for any small, local business to pay $9 an hour for entry-level employment.

“The problem is getting them trained and up to speed,” said Reed. “It’s really hard to pay anyone $9 when it’s their first job and we have to train them on how to do everything.”

According to the Idaho Department of Labor, in 2011, 12,000 Idahoans earned minimum wage and 19,000 earned minimum wage or less. That’s about 5 percent of the population.

Economist Will Jenson said if the minimum wage goes up, so do the cost of products and services and businesses will have to adjust.

“Finding ways to be more efficient to try to save pennies and dollars to pay for the higher wages or cut back on work force,” said Jenson.

It’s a situation Reed’s Dairy was in a couple of years ago.

“We actually did have to raise our prices some back about three years ago to help compensate for that minimum wage increase at that time.”

Idaho and Utah offer the same minimum wage as the federal standard. There are a couple of neighboring states that offer more than $7.25, but they do have a higher cost of living.

The current federal minimum wage of $7.25 an hour provides a salary of a little more than $14,000 per year. That’s well below the cost of living in many parts of the U.S.