Premium ContentClick on Premium Content on the Featured navigation bar for information.
The good news for 20 percent of the Great Clips workforce in the area is that they’re due a raise, thanks to an increase coming this week in the minimum wage.
The bad news: Owner Ron Ayala doesn’t believe his 21 salons can bear the increase.
Times are tough for employees and businesses alike. But when the federal minimum wage goes up Friday, it will have a split impact.
Employees across Nebraska who could most use a raise will earn 70 cents more an hour, which for full-time workers comes out to $121 more each month.
Yet a jump in payroll couldn’t come at a worse time for many businesses dealing with tighter consumer spending and slimmer profits.
Ayala, who oversees a chain that operates in the Omaha metro, Lincoln and Grand Island, said he sees two options for his business: cut hours for office staff and receptionists, or cut staff. He said he might even have to lay off one receptionist at each salon.
A price increase of $1 across the board could make up for the higher wage costs, Ayala said. But he said he rejected that option at a time when customers are stretching their haircut cycles and calling every day asking for coupons.
“We’re in a penny profit business, and every penny counts,” he said. “I have to be able to pay you.”
Across Nebraska, some 20,000 workers earn minimum wage, according to the latest statistics from the U.S. Bureau of Labor Statistics. Those workers are due an increase from $6.55 to $7.25 an hour.
The increase also will have an effect in 29 other states. Iowa increased its minimum wage to $7.25 last year.
The new national minimum is the product of a law that Congress passed — and then-President George W. Bush signed — in 2007 raising minimum wage from $5.15 to $7.25 in three steps.
Eric Thompson, director of the Bureau of Business Research at the University of Nebraska-Lincoln, said the latest increase will create more winners than losers in the workforce. At the same time, he said, “the losers can lose big.”
The increase will hurt job growth as the economy tries to pull out of the recession, he said.
“The timing is not good,” he said. “This is not a time to have additional layoffs or make some firms less likely to hire.”
At the Hollywood Candy store at Westroads Mall, 20-year-old Priscilla Morgan stands to benefit from the change.
In June, she lost a full-time job that paid $8.50 an hour when the Cinnabon at Westroads closed. She has dropped down to minimum wage and about 30 hours a week at Hollywood Candy, and she said that forced her to cut a lot of her spending on things like clothes, hair care and fast food.
She said she hopes to work up to a wage of at least $8 an hour.
“It’s cool,” Morgan said of her coming pay increase, although she would like to make more.
The gains will be felt most in food preparation and other service jobs, which are most likely to pay minimum wage. Still, minimum wage jobs are present in all sectors of the economy.
In Nebraska, the 20,000 minimum wage workers represent 3.6 percent of the state’s hourly workforce.
If they’re full time, minimum wage workers will earn an extra $1,456 in pay for the year.
Annemarie Bailey Fowler, who works with Nebraska’s Opportunity@Work policy group that promotes better pay for working families, said the pay increase will help low-income workers who are struggling to pay for medical care, child care and nutritional food for their families.
But the increase is not enough, she said.
“We know many families will be left somewhat short at the end of the month,” Bailey Fowler said.
In Wahoo, high school junior Alex Vasa said he would use any extra money from his part-time job at Pizza Hut for “miscellaneous stuff” and payments on his 2003 Pontiac Grand Prix.
But manager Josh Hansen is watching how the higher wages will affect operations.
Hansen said he will cut employees’ hours if necessary to hold down costs. Still, he said, that’s tough to do because the restaurant is increasing its business after introducing hot wings and a budget menu.
“Even if I cut the hours,” Hansen said, “it doesn’t make a big dent.”
Hansen said he hopes the impact to the business will level out within three to six months.
“It’s going to change our thought process on everything for how we run the business.”
Contact the writer:
444-1128, jeff.robb@owh.com
Copyright ©2012 Omaha World-Herald®. All rights reserved. This material may not be published, broadcast, rewritten, displayed or redistributed for any purpose without permission from the Omaha World-Herald.
