Business

As wage rises in Johnson County, so do some worries

Businesses in Johnson County could face hodgepodge of rules

University of Iowa student Becca Lasack of Lisbon makes an ice cream order recently at the Dairy Queen in Solon. The city last month opted out of a Johnson County ordinance that will increase the minimum wage in 95-cent increments, beginning in November, to $10.10 an hour by 2017 — deciding instead to keep it at the state and federal level of $7.25. Although Lasack once earned the minimum wage, she had advanced from there and now earns more. (Adam Wesley/The Gazette)
University of Iowa student Becca Lasack of Lisbon makes an ice cream order recently at the Dairy Queen in Solon. The city last month opted out of a Johnson County ordinance that will increase the minimum wage in 95-cent increments, beginning in November, to $10.10 an hour by 2017 — deciding instead to keep it at the state and federal level of $7.25. Although Lasack once earned the minimum wage, she had advanced from there and now earns more. (Adam Wesley/The Gazette)

IOWA CITY — In less than a month, the first phase of Johnson County’s higher minimum wage kicks in, but not all of the county’s 11 communities may be on board with the plan.

Solon’s City Council passed an ordinance last month to stick with the state and federal minimum of $7.25 an hour. Swisher is expected to discuss a similar ordinance soon.

Two of the county’s largest cities — Iowa City and Coralville — haven’t indicated what they’ll do, although Iowa City’s attorney told council members she doesn’t believe the county rules to bring the minimum to $10.10 an hour by 2017 would survive a legal challenge.

All this opens the door to a quandary for businesses that could face different wage thresholds — and a new competitive wrinkle — within one county.

Jessica Dunker, president and chief executive officer of the Iowa Restaurant Association, said differing minimum wages within a single county will not only add confusion, but provide an unfair disadvantage to business owners required to raise their wages.

While independent business owners, who have some flexibility with prices and budgets, should be able to easier manage the transition, local franchise owners who face corporate mandated prices and food contracts will feel the most strain, she said.

“They’re immediately put at a disadvantage,” Dunker said. “The only piece of that model that you are affecting — what they can do to make sure they are still turning enough profit to pay the bills — is labor.”

ARTICLE CONTINUES BELOW ADVERTISEMENT

At $7.25, the Iowa minimum wage is the same as the federal minimum wage. It was last increased in 2008 from $5.15. Recent attempts in the Iowa Legislature to raise it have failed, which helped prompt Johnson County to take action itself.

The ordinance it passed will raise the wage threshold in the county in increments until 2017, with the wage then tied to a price index. The first phase of the new rule takes effect in November when it rises by 95 cents to $8.20.

Last year, when President Barack Obama proposed an increase to $10.10, the Congressional Budget Office determined it would raise the salary of 16.5 million workers nationwide, but also cost a half million jobs.

Tracy McWane, owner of the Iowa City Dairy Queen at 526 S. Riverside Dr. and the territory operator who oversees the county’s five individually-owned Dairy Queen stores, said she is prepared to adapt to any changes.

“Somehow I guess I would have to make it work,” she said, adding that the lowest wage any of her seven employees makes is $8.75 an hour — higher than the minimum now, but lower than what county rules eventually call for. “We’ll adapt and raise prices. We’ve had to do that before.”

McWane and other Iowa City business owners could soon get an answer on how the Iowa City Council plans to proceed on wages.

In response to a City Council request last month to look into the ordinance, Iowa City Attorney Eleanor Dilkes said she does not feel a local minimum wage ordinance would withstand a challenge in Iowa court because of an exception to the county’s home rule authority.

The exception has to do with when counties can and cannot enact laws governing civil relationships — such as a wage ordinance.

ARTICLE CONTINUES BELOW ADVERTISEMENT

Thank you for signing up for our e-newsletter!

You should start receiving the e-newsletters within a couple days.

But opinions of the provision’s language differ, and so far it has been untested in Iowa appeals courts.

The Iowa City Council is set Tuesday to discuss — but not formally vote on — its options, which include allowing the county ordinance to take effect in the city or passing a counter ordinance essentially to opt out.

Only 12 miles from McWane’s shop, the Dairy Queen in Solon, 101 Prairie Rose Lane, will not see a mandated wage increase, since the Solon City Council last month passed a counter ordinance.

Franchise owner Robin Ruzicka said she appreciates her City Council’s decision.

“I am really glad that Solon made the decision that they made, because a lot of our help here in Solon are high schoolers,” she said. “In my opinion they don’t need to start out at 10 an hour; that’s something that needs to be earned.”

Ruzicka said that she, too, would have to raise prices if faced with a wage hike.

While the local Dairy Queen shops are individually owned, all 430 Kum & Go convenience stores across 11 states including Iowa are corporate owned.

Kristie Bell, communications director for Kum & Go, said the first round of Johnson County’s wage hike will not impact any of the company’s employees, but will if the wage climbs.

With several factors weighed in setting wages, Bell said it’s possible many locations would be affected, not just those with a higher wage rules.

“It’s really store by store, market by market, so I’m sure the surrounding area’s minimum wages would come into play,” she said. “But we would price our wages at what’s competitive at our market.”

ARTICLE CONTINUES BELOW ADVERTISEMENT

As companies prepare to adjust to what the Board of Supervisors said is an “aggressive” schedule to increase the minimum wage, Dunker said some businesses already feel an impact.

“All of a sudden you’ve made those franchises less profitable because they have to shift resources to fit the mandate. Nobody who runs a business budgets six weeks out,” she said. “You’ve immediately created a loss model for that franchise.”

Dunker, who said she supports a statewide mandate on the minimum wage, said she predicts Johnson County’s ordinance, which is the only one of its kind in the state’s 99 counties, will come at a cost.

“I think it will be slow, because it is a three-part piece, but if Johnson County remains an island, then you will see a decrease in the number of restaurants and you will see a decrease in the number of jobs, even in the restaurants that stay in the market,” she said. “I understand that people don’t want to hear it, but when the minimum wage goes up, jobs are lost.”

l Comments: (319) 339-3175; mitchell.schmidt@thegazette.com

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.