Government

Minimum wage pre-emption might not lower wages for all

'Once you're there, you're there'

(File Photo) Supervisor Ben Rogers, District 3, speaks on the benefits of the minimum wage increase during a press conference celebrating wage increases across four Iowa counties, including Linn County, in Cedar Rapids on Saturday, Jan. 7, 2017. (Photo by Michaela Ramm/The Gazette)
(File Photo) Supervisor Ben Rogers, District 3, speaks on the benefits of the minimum wage increase during a press conference celebrating wage increases across four Iowa counties, including Linn County, in Cedar Rapids on Saturday, Jan. 7, 2017. (Photo by Michaela Ramm/The Gazette)

If Republican-backed pre-emption efforts become Iowa law, the minimum wage in Linn and Johnson counties will drop back to the state’s $7.25 hourly rate. But some business owners say they don’t plan to cut raises that were forced by local wage increases.

“Once you’re there, you’re there. I don’t see how you go back,” said Travis Stovie, managing director with 18 Burger King restaurants, including five in Linn and two in Johnson. “I don’t think that’s feasible, that’s too hard of a thing to do for any of our employees ... . I just don’t see it.”

House File 295 would prohibit local governments from passing minimum wage increases above the state rate. However, it also would eliminate Johnson County’s $10.10 per hour minimum wage and a $8.25 per hour rate in Linn County.

Wapello County’s $8.20 hourly rate and Polk County’s increase to $8.75 an hour in April also would be abolished.

Meanwhile, Republican leaders on Thursday said they don’t expect to consider an increase to the state minimum wage this session.

But while pre-emption would return the minimum wage in four Iowa counties to the state/federal rate of $7.25 an hour, some business owners — who already have adjusted to wage increases — say employees are likely to keep their higher pay.

At Stovie’s Burger Kings, however, new employees hired after pre-emption — especially those with less experience — could be hired at wages closer to the minimum rate, Stovie said.

ARTICLE CONTINUES BELOW ADVERTISEMENT

Iowa’s minimum wage has remained at $7.25 an hour since 2008, but Johnson County supervisors in 2015 approved a three-tier increase to the countywide rate, which brought the local minimum wage to $10.10 this January.

Officials with the University of Iowa, the county’s largest employer, have argued the university was not subject to a county ordinance. But they have increased housing and dining wages to from $8.24 to $9.50 to remain competitive with local wage increases.

UI and Iowa Board of Regents officials said they would not comment on pending legislation, so it’s unclear if the university will react to pre-emption of the county’s minimum wage ordinance.

Linn County’s minimum wage — which is slated to reach $10.25 an hour in 2019 — rose to $8.25 earlier this year.

In addition, some cities within all four counties have passed counter-ordinances, essentially sticking with the state rate. The largest metropolitan areas in Linn and Johnson counties — Cedar Rapids, Coralville, Iowa City and Marion — have followed their respective county’s wage increases.

Jessica Dunker is president and chief executive officer of the Iowa Restaurant Association, which represents more than 6,000 eating and drinking establishments with a total of more than 145,000 employees. If House File 295 passes, she said, many employers could find it difficult to simply cut employee pay.

“I can’t imagine anyone going backward, honestly,” Dunker said.

Tracey 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 traditionally had paid more than the state minimum to be competitive.

While Johnson County’s $10.10 an hour minimum wage has made it more difficult to find employees, McWane also said she doesn’t plan to cut wages.

ARTICLE CONTINUES BELOW ADVERTISEMENT

Thank you for signing up for our e-newsletter!

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

“If they started at $10.10, I’m not going to pay them less than that. I’m not going to take that away,” she said.

Richard Pankey, who owns Linn County restaurants Daisy’s Garage, Riley’s Cafe and Butcher Block Steakhouse, also said he doesn’t plan to reduce any wages if pre-emption takes effect.

Pankey said Linn County’s $1 increase to the minimum wage has provided raises to about 75 of the roughly 300 people he employs — mostly servers and hosts — and has cost an additional $3,000 a month.

“That comes straight out of our bottom line,” Pankey said. “we’ll need to adjust prices to make everything cost a bit more to recoup that.”

Dunker said most restaurant owners aren’t opposed to minimum wage increases, but rather that local ordinances such as those in Linn and Johnson have not made adjustments for tipped employees.

Per Iowa Code, tipped employees — typically hosts, servers or bartenders — are to receive a base pay of 60 percent of the existing minimum wage, or $4.35 an hour for a $7.25 rate. If that tipped employee does not average at least the minimum wage when tips are included, the employer must fill in the gap out of pocket.

Dunker said Iowa’s tipped employees average between $15 and $30 an hour, but still receive the base tip wage no matter what they make in tips.

The problem with minimum wage increases in Linn and Johnson counties is the base pay for tipped employees also ratchets up with every increase, Dunker said. With Johnson’s $10.10 rate, the base rate for tipped employees is at about $6.03 an hour.

ARTICLE CONTINUES BELOW ADVERTISEMENT

“That’s why we always are growling so much about the tip wage because we would like that to stop sliding as a percentage and just set a tip wage,” Dunker said.

With the average Iowa restaurant seeing a daily net profit of about $97 dollars, margins are slim, Dunker said.

In Linn County, Zeppelins Bar and Grill owner Dan Marquardt said the county’s $1 minimum wage increase has cost him just over $30,000 so far.

“Whatever you want to set it at, set it at,” he said of the minimum wage. “The problem is throwing in the tipped employees with the hourly employees.”

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.