“I got my son back because I worked here. It kept me out of trouble and on the right path,” Stacey Osborn said.
Osborn lives in Hillsdale, a small town in rural Michigan. She used to work at Tastes of Life, a local restaurant that supported a residential program, Life Challenge of Michigan. It provided training in social, developmental, waitressing, and cooking skills to people who needed help getting on their feet. Some employees had cancer, experienced deaths in the family, spent time in jail, or struggled with substance abuse.
That is, until Michigan’s legislature hiked the mandatory minimum wage.
Life After a Minimum-Wage Hike: ‘It Hurts So Bad’
Osborn was with Tastes of Life from day one—Father’s Day of 2012—until the restaurant closed on September 28 because of the minimum wage hike. She said she came to the restaurant with a lot of problems that the owners, Pastor Jack Mosley and his wife, Linda, helped her through.
“I could go to them for anything,” Osborn said. “It hurts so bad that it closed.”
Mosley explained that, unlike a typical business that might fire a chef with a hot temper “who breaks dishes,” Tastes of Life managers were more long-suffering and wanted to help employees polish their life skills.
“Life has issues,” Mosley said. “This was a place to shore them up, and help them cope and get through.”
Osborn said she has looked for other jobs, but nothing compares to what Tastes of Life was to her. Instead of working for a warm family restaurant, Osborn has found offers to bartend late at night. She doesn’t want to work someplace that will send her in the wrong direction.
Conservatives spend hours complaining about the minimum-wage hike in theoretical terms, but rarely sit down and look at tangible examples of their ideas. But in Hillsdale, Michigan—population 8,207—mom and pop businesses are making cuts, raising prices, and closing shop because of the 75-cent-per-hour increase.
Unions Hold Low-Income Workers Hostage
Michigan unions threatened they’d sponsor a ballot initiative to raise the minimum wage to $10.10 an hour. To keep the question off the ballot, the Republican-controlled legislature passed a compromise. Before September 1, 2014, the minimum wage in Michigan for regular employees was $7.40 and for tipped workers was $2.65. The new law raised the wage to $8.15 and $3.10, respectively. It will increase incrementally until 2018, when it will be $9.25 and $3.52.
“I did the math and realized I would need 200 more customers a week to stay open,” Mosley said.
That, accompanied by the fact that many of their customers go south for the winter and food prices have risen dramatically, forced Mosley to close doors. Twelve people lost their jobs.
Terry Hatch, another Tastes of Life employee, had worked at the restaurant for six months.
“I have a few disabilities and this gave me friends. It was a lot more than a paycheck,” Hatch added.
Co-worker Makenzie Wirick came to Tastes of Life in April 2012 and left only a week before it closed.
“It gave me something to do and I have friends here. Jack was a big part of my family and this was a nice place to work,” Wirick said.
Mosley isn’t giving up. The building will become a women’s center where pregnant women or those with young children will be able to go for a mentoring program.
“We are disappointed,” Mosley said, regarding the closure of Tastes of Life. “But we want to thank anyone reading for their support.”
Help Not Wanted at Unaffordable Prices
Lori Burger, manager of Hillsdale’s House of Pizza and BBQ, said she has started cutting her employees’ hours. She employs seven young women, and the minimum wage affects her profit margin.
“It’s good for the employees, but as far as the restaurant owners, it’s not good,” Burger said. “I hope it doesn’t affect us staying open.”
Although she will keep taking applications, she said there’s no sense in hiring new employees when she is cutting hours for the ones she already has.
The very people the wage hike is supposed to help end up with a higher wage, but less work. Lisa Slade has worked at the Finish Line Restaurant since 1976 and now owns the business. She said the first incremental wage increase hasn’t affected her yet because she only has one minimum-wage employee. However, she said the future increases will mean she’ll have to raise menu prices.
“It irritates me because the government dictates what to pay,” Slade said. “I like to give people raises when they do a good job. The guy who is doing a good job shouldn’t make the same amount as the guy who is still learning.”
She added that she is trying to be wise about when she schedules people, making sure the restaurant doesn’t have more people on the floor than it needs.
Higher Wages for Some Mean Higher Prices for Everyone
“It seems it’s all going to wash,” Slade said. “Not just my prices will go up. Most businesses are going to raise their prices. How did that help?”
Pai Ringenberg, owner of the Coffee Cup Diner, shared Slade’s sentiment.
“You get more, you pay more,” Ringenberg said.
She said if lawmakers raise the wage, businesses will raise prices to cover it, and that influences everyone’s cost of living. As a result, lawmakers will want to raise the wage again.
She pays her employees more than minimum wage, but she increased their wages anyway, to be fair. Her employee who made $8 now makes $9 an hour. She had to increase her menu prices to try and make up the difference, but said her grocery bill is so high that she isn’t profiting much.
“But I’m not a worry wart,” Ringenberg said. “Business still looks good.”
Debra Kamen, owner of David’s Dolce Vita, a small retail store of fine wine and cigars, said her business runs on very tight margins in order to compete for customer purchases.
“We have a store manager and a couple of part-time employees,” Kamen said in an email. “These folks are hard-working professionals and very knowledgeable of our industry products.”
She also raised all her employees’ wages.
“Our feeling is that folks who have worked hard to get to their current wage should not be put at a disadvantage by those that may not have worked as hard due to a stroke of the pen by the State,” Kamen added.
However, because of Dolce Vita’s tight margins, that increase has had a significant impact on business. Kamen said there is no way to absorb those costs without increasing sales, so instead she has to pass the cost increases on to consumers by increasing prices, or face closing her business.
Pricing Normal Folks Out of the American Dream
In the end, a forced wage increase only makes it harder for people to get into the workplace.
If employers have to pay more, they want their employees come with more specialized skills and stronger work ethics. Sue Smith of the Hillsdale Economic Development Partnership said the minimum-wage hike hardly touches advanced fields like manufacturing or health care, where education and training are prerequisites to employment.
But entry-level workplaces such as restaurants or retail stores can’t survive under the pressure. The wage increase discourages entrepreneurs from chasing the American Dream, because they can’t afford the price tag.
As Osborn’s story shows, the very people the minimum wage hike was sold as helping often lose their jobs because of it. Those who need more work hours are getting fewer, and those who would have benefited from lower prices are paying more for everyday items. The minimum wage hike is a self-destructing initiative—just ask your local barista.