Be careful what you picket for - minimum wage increase consequences

THE WOODLANDS, Texas -- Fast food workers across the country walked off their jobs Thursday, August 29, asking for a doubling of the minimum wage — but like the food they serve, a wage hike seems convenient, but in the end may not be as healthy as they think.

Leading into Labor Day, workers are trying to highlight the difficulties of living on minimum wage, which in Texas is $7.25 an hour, a wage that picketers in over 60 cities are hoping to raise to $15. Earlier this year, Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) introduced and attempt to raise the federal minimum wage to $10.10 per hour, above the $7.25 level set in 2009.

A heated debate rages around the effects of minimum wage increases—whether or not they really help workers, and their effect on business. According to the National Employment Law Project, the majority of recent job creation has occurred at the low end, creating low-paying jobs such as those that dominate the fast food industry. In response, the minimum-wage debate has gone from a simmer to a boil.

"The cost of every product includes the cost a business has in making that product," says Kevin Price, host of "Price of Business" on Business Talk 1110 KTEK . Price is also a guest on national media , including Fox Business, Fox News, and the Huffington Post. "If the minimum wage goes up, that increase is mirrored in all goods and services–restaurants, grocery stores and any place where low-skilled, young labor is used."

Price feels that businesses will work around the minimum wage—“entrepreneurs are entrepreneurial in all their activities," he says. "When forced, they'll make accommodations" and often the people the government wants to help most are adversely affected by increased prices and a cut-back in their hours.

In absolute terms, Melissa Rascon, senior tax manager and executive director at Oman, Berry & Associates reminds that a 100 percent increase in pay does not equate to double the money. With a $15 an hour minimum wage, a person working 40 hours a week would see a monthly surge in their income of about $1,250 monthly. But that increase in pay will also raise their federal tax withholding amount by $170 per month, plus an additional amount for Social-Security withholdings.

Once that money is taken off the top, Rascon says, the prices at grocery stores, convenience stores and fast-food restaurants that rely on minimum-wage workers will go up. The minimum wage worker will pay, for example, an extra $150 a month for groceries and an extra buck for their McDonald's hamburger. The extra pay won't add up to double for long.

The issue is keenly felt in Texas. According to the U.S. Department of Health & Human Services, the U.S. Poverty level in 2013 for a family of two is $15,510. The latest U.S. Census showed 17 percent of Texans living below the national poverty level for the period of 2007-2011, a higher rate than the national average.

"People don't normally see fast-food restaurants as end-all, be-all jobs. These jobs are temporary in nature, geared more toward those in high school, or to help students get through college," Rascon says. Therefore, a one or two dollar increase could help, but some form of specialized trade training as vocational training or community college studies would provide more of a long-term benefit to the average worker.

For more information, Melissa Rascon, Executive Director, Oman, Berry & Associates, can be reached at the link below.