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No room for growth 'now’

McClatchy-Tribune Information Services

June 15, 2015


Child-care assistant Eunice Medina, 23, was thrilled when a $12.25 minimum wage took effect in Oakland, Calif., in March. But almost as quickly, Medina’s workdays were cut and her hours shaved from eight to six.

Her employer, Asiya Jabbaar, says she had no choice. Despite slicing hours and laying off one of three assistants, Jabbaar says she still may need to close her business next year and convert it to a part-time after-school program.

It’s a big letdown for the 38-year-old Jabbaar, who launched Reaching Beyond Care in 2010.

Her experience illustrates what can happen to small employers when minimum wages jump suddenly. The effect on licensed or government-regulated entities, such as Jabbaar’s, can be particularly sharp.

Because state law requires at least a 6-to-1 child-teacher staffing ratio for small home-based child-care providers, it’s difficult to respond to higher wage costs by simply trimming hours or staff. And Jabbaar voluntarily adheres to an even stricter ratio of 3 to 1.

So while Oakland’s new higher minimum wage may lure some stay-at-home parents back into the labor force, the irony is that they may face higher prices and fewer options when searching for child care.

Jabbaar worries most about maintaining high-quality staff if she’s unable to offer steady pay raises. Before the wage hike, she started workers at $9, and every year bumped up their pay by a dollar or so, hoping to keep them satisfied and at their jobs until the next raise came around.

"There’s no room for growth now," Jabbaar said on a recent morning as she cared for three 2 1/2-year-olds. "It wouldn’t be fair to keep (workers) at $12.25. They’re at that cap."

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POSTER CHILD FOR A RAISE

McDonald’s grill cook Douglas Hunter is literally the poster child for a $15 minimum wage: The Chicago man’s picture and story are featured in the "Fight for $15" national campaign.

Hunter’s current pay of $9.25 an hour leaves little left for the single father and his daughter, Serenity.

When Hunter, 53, couldn’t afford her junior prom outfit, he sewed a black lace dress for her, even as they fought along the way about the hemline.

"She picked the material," he said. "I got to pick the length."

Chicago’s minimum pay goes to $10 an hour in July. But a steep pay raise would bring unintended consequences for Hunter, a diabetic with multiple medical conditions whose care is covered by Cook County’s program for the uninsured and poor.

At $15 an hour, his annual income would become too high to qualify for CountyCare under the current income limit.

So any salary gains could be wiped out by the price of his medications and supplies, including two kinds of insulin at $403 a month and drugs to control high cholesterol and blood pressure that add an extra $330 a month.

And that’s not including the syringes, health checkups and eyeglasses he receives for free, allowing him to avoid choosing between maintaining his health and providing for his teenager.

At $15, he figures he’d need to reduce his total work hours to ensure his new income didn’t disqualify him from his current benefits.

"That’s going to be a problem," Hunter acknowledged. "A raise will kick me out of CountyCare. Then the medicines are going to cost so much I won’t be able to afford my apartment."

—Don Lee

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POSSIBLE BOOST FOR BUSINESS

Gina Schaefer prides herself in taking care of workers. The owner of 10 Ace Hardware stores in the Washington, D.C., area pays her 215 employees at least $10.50 an hour. That’s a buck more than the legal minimum in the capital and much more than suburbs in Maryland and Virginia.

Going to $15 an hour, she says, might actually help in significant ways. She’s learned from experience that paying more can boost the bottom line by leading to a happier, more productive workforce.

Before Schaefer voluntarily bumped up the starting wage by $2 an hour in 2011, she was replacing about 80 percent of her employees every year. That’s since dropped in half, sharply cutting her training costs and boosting productivity.

But a higher minimum wage would cost Schaefer in other ways. With less turnover, the average age of her workers would probably tick up a bit from the 19-to-27 range today. And older workers are a little more costly, even if they are more productive and dependable.

Labor accounts for a hefty 20 percent of Schaefer’s total expenses. If that rises and her sales don’t, she says she would look at ordering more higher-margin products, like cheaper-priced tools. She would also probably raise some prices.

Schaefer, 44, says she also may have to increase how much workers pay for their healthcare premiums, now 20 percent. And she and her husband, who manages the books, would probably take pay cuts. Nor does she rule out the possibility of cutting jobs.

Even so, she still thinks that going to $15 an hour makes good financial sense, as long as it’s not raised too quickly. "If people are making more money, maybe they won’t have to shop at Wal-Mart," she says, "and they’ll shop at my store."

—Don Lee

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INCREASE WILL MAKE ‘A HUGE, HUGE DIFFERENCE’

Marissa Avila, 36, often faces difficult decisions: Does she buy shoes for her sons or pay her phone bill? Splurge on movie tickets or treat her kids to meat?

For nearly 12 years, Avila has washed dishes and helped cook at the Mid-Wilshire Convalescent Hospital, a nursing home. She started out earning $8.50 an hour and now makes $11.20. At $15 an hour, which the city of Los Angeles is moving to require by 2020, the single mother sees better choices in her future.

"It’s going to be a huge, huge difference," she said. "Even 25 cents or 50 cents could change a lot for my life and the lives of my kids."

First, she would hire a baby-sitter to watch her 8-year-old in the mornings so she doesn’t need to wake him up at 5 a.m. and bring him to work until she can rush him to school during her 7:30 a.m. break.

Four years ago, Avila’s husband divorced her and stopped supporting the children. Rent for her one-bedroom apartment rose 4 percent to $950 a month earlier this year. Sometimes, she has to delay her bill payments.

Initially, Avila was skeptical of the plan to phase in the citywide minimum wage increase. At her current pay grade, she probably won’t feel an effect until the floor reaches $12 an hour on July 1, 2017.

But the promise of better compensation allows her to dream about saving a little for the future or affording a more prestigious college for her 15-year-old. "I’d feel proud to earn a little more," she said. "And I’d be happier."

—Tiffany Hsu