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More money = less money?



The Montana Senate voted Tuesday, Feb. 1, to raise the minimum wage from $5.15 an hour to $6.25, much to the chagrin of Republicans who say the adjustment will make it difficult for businesses to afford payroll.

Montana’s minimum wage, which has been locked to the federal rate, hasn’t changed since 1997.

Charlie Beaton, owner of Missoula’s Big Dipper Ice Cream, says he understands why the Senate voted for the bump. His employees start out at $5.50 per hour and receive a 50-cent raise after the first month. The ice cream entrepreneur isn’t too worried about the wage hike for his 15 employees, but others are.

“Increasing minimum wage hurts business,” says Tim Jellison, owner of Finnegan’s Family Restaurants in Missoula and Kalispell. His explanation could’ve been lifted out of an economics textbook: The increase will benefit waiters and waitresses at the onset, but added labor costs will force Jellison to raise menu prices. “And customers don’t like that,” he says. Increased prices mean he’ll sell fewer plates of food, leading to reduced hours for his employees. “In the end we’re hurting the ones we’re trying to help,” he says.

The eight-year freeze on the minimum wage might have been advantageous to Montana businesses, but employees have seen their purchasing power dwindle. The U.S. Consumer Price Index, which measures inflation through changes in the retail price of a fixed basket of goods and services, has increased 19.6 percent since 1997.

When inflation is taken into account, today’s minimum wage workers actually make $1 less per hour in terms of purchasing power than they did in 1997. Senate Bill 78’s 21.4 percent increase to $6.25 will slightly overcompensate for that shortfall.

In Washington and Oregon, two of 11 states where workers enjoy hourly wages higher than the federal rate, the minimum wage is adjusted every year to the U.S. Consumer Price Index.

Montana’s lowest paid workers are advised to keep the bottle of bubbly wine in the cooler for a few more weeks. Before Gov. Schweitzer can sign the bill into law, it must pass through three readings in the House, the first of which should commence some time after Feb. 25.


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