Minimum Wage Hike = Reduced Hours

HUNTSVILLE (WATE) — The federal minimum wage has gone up to $7.25 an hour and in a county that already has Tennessee’s highest unemployment rate, a grocery store has to make some changes.

Scenic Foods sits just off of Highway 63 in Scott County. It’s the kind of store where you can get a little bit of everything, including a down home feel. But owner Bruce Posey isn’t exactly happy about the 70 cent minimum wage increase. “It is hard on a small business to absorb this.”

Starting Monday, the 12 part time employees making minimum wage will have their hours cut. “If we don’t cut hours, it could add as much as $400 to $500 per week to the pay roll,” Posey explains.

MP: As I pointed out in a recent CD post, increases in the minimum wage are guaranteed to have adverse effects on employees that will NOT necessarily be reflected in increases in the teenage unemployment rate. In the case above, none of the minimum wage workers at Scenic Foods employees have lost their jobs because of the minimum wage hike, but they have all had their hours reduced. These workers and thousands of others like them whose hours have been cut, will still be counted as being employed by the BLS, and the teenage unemployment rate won’t necessarily change.

Bottom Line: The demand curve for unskilled workers, like all other demand curves, slopes downward. At higher wages, the number of hours demanded for unskilled labor decreases. Period. Unskilled workers are harmed by increases in the minimum wage, even those who manage to keep their jobs like the employees at Scenic Foods.

About Mark J. Perry 262 Articles

Affiliation: University of Michigan

Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan.

He holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University in Washington, D.C. and an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota.

Since 1997, Professor Perry has been a member of the Board of Scholars for the Mackinac Center for Public Policy, a nonpartisan research and public policy institute in Michigan.

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1 Comment on Minimum Wage Hike = Reduced Hours

  1. Not just unskilled workers my friend. I’m a Graphic Designer for a publisher in East TN and I’ve been done over by minimum wage twice now.

    1. Before it went up, I made a little above minimum (which wasn’t great to begin with) and now I make the same as the warehouse workers…no wait they are still working full time… so they’re actually making more, because…

    2. My hours have been cut back too, twice. They had been cut back quite a bit for most of 2009 (in preparation for the hike) and now they’ve been cut back even more.

    I’m supposed to live on that? O.k., if I live at home with my mom and dad and if I’m not in my 30’s, but I’m supposed to pay rent and utilities and have a car to drive on like 500 a month? Ridiculous. Oh, wait… no, actually it’s three times now, because every item I buy has went up like .30 cents or so. It was almost impossible to stay afloat before minimum wage went up.

    What don’t these idiots get about raising minimum wage is hurting the people who were already hurting to begin with? That’s why we have a problem with food stamp abuse as well. I know of people who quit working altogether because they can draw more in food stamps than they can make working (and get more for it too… no tax).

    Oh, yeah, that’s right… “those idiots” never had to work and live on minimum wage as an adult living on their own, if ever. And I know what their “stats” say… it’s just school kids and uneducated adults… but it’s certainly not. I graduated with high honors and went to school for Graphic Design. I also work with a lot of people who DO have an education that are struggling to survive everyday making minimum wage as well… and actually, the teens at McDonald’s start out a little above minimum in this area. We work for a large employer in the area who owns many businesses in many places. They should be ashamed of themselves. Oh, but we are told we are “lucky” to have a job at all. Lucky… that’s funny, since most of us could draw the same or more in unemployment.

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