The minimum wage trap

Minimum-wage jobs. Entry-level wages. Poverty-level jobs. Individuals unable to survive on extremely low wages. Working individuals forced to seek public assistance due to low earnings. All of these words and phrases definitely bring negative images immediately to mind of massively suffering hard-working individuals caught in the trap of Third World country wages here in our workforce. The stigma of minimum-wage positions seems to infect the workplace.

Media reports of jobs massively fleeing our country for the slave-level wages of undeveloped countries puts a stain on business in general. One often has the impression that to retain these companies, our society had better be ready to accept (condone?) minimum-wage jobs. Other reports seem to imply that a minimum-wage job is just punishment for the illiterate, unskilled individuals in our workforce.

So what really is a minimum-wage job and do they exist in this area? To what degree? Does our northern Nevada society need to accept these jobs as inevitable?

The federal minimum wage is currently $5.15 per hour ($10,712/year of 40 hour weeks, no overtime) and in Nevada it is $6.15 per hour ($12,792) for some employees. The U.S. Congress is currently debating an ultimate increase to $7.25 per hour ($15,080) which would translate into $8.25 ($17,160) per hour for some Nevada minimum wage employees.

Minimum-wage jobs do exist in northern Nevada. Many individuals in the service and hospitality industries receive minimum wages when the majority of their income is from tips. Total annual income for these individuals is usually far above minimum wage. Some jobs for young workers pay minimum wage and require few if any job skills. These types of jobs are often short-term and give these individuals their first work experience. Overall, full time federal or Nevada minimum wage jobs are few in total in this area.

Higher than minimum wage but still low in the pay range jobs are definitely greater in number in our region and many identify these as minimum-wage jobs. Low-pay positions in Reno are generally in service industries and require few if any previous work skills. An individual who desires greater skills and an increasing salary potential can use a low-pay position to gain valuable experience and then seek other better paying opportunities. Others who are satisfied with this pay will continue in these jobs.

(My managers and I once studied our success in attracting individuals to job fairs so they could learn how to move up the economic ladder and earn better wages. We were very surprised at the number of people who were not interested in acquiring needed skills to enable higher wages to come their way. They indicated to us that their current pay situation was OK.)

When discussing minimum-wage jobs, it is necessary to review what benefits, if any, an individual in this pay range receives. As a general rule, the closer to actual minimum wage a person receives, the fewer benefits the employer offers. A lack of benefits in addition to a low salary places a heavy burden on the individual to cover all of life's incidentals as they occur.

Under our economic system, it is very difficult to tell employers what salary and benefit level they must pay. Employers will argue that skill levels for entry positions differ significantly from those that are well beyond the entry position. Businesses want employees who will perform to levels that bring a positive benefit to the company. In their thinking, minimum performance equals minimum wage.

For a long time, outsiders coming to northern Nevada had the mistaken notion that we possessed a poorly educated workforce that would be willing to apply for any job regardless of the low wages. Individuals seeking local workforce data from Nevadaworks who disregarded my comments about that myth and located here often suffered excessive turnover of employees. It is a fact that employers with the lowest wages and fewest benefits are most disgruntled with our workforce. They prefer to blame the workforce rather than look at the low wages they offer. Often, these companies stay in our area a short time and then move on. These companies are not beneficial to our area.

Because of the high cost of housing and the above average cost of goods and services in our area, it is my opinion that the realistic regional minimum wage is now generally in the $9.50 per hour ($19,760) range. Companies that offer entry-level employees that salary plus at least modest benefits with the option for position growth as skills develop and improve, will attract a good workforce and not suffer the turnover noted above.

The current Reno area industrial average wage is $17.65 per hour ($36,400). Organizations pay this industrial average because employee work results warrant that level of pay. An individual starting with a company at the $9.50 minimum can look forward to advancing wages as new skills and education that benefit company and worker are acquired. The wide range of jobs available in this area should not limit someone to a flat salary that might be acceptable today but not tomorrow.

During the past two years, the Reno area added over 25,000 new workers to the labor pool and unemployment remained basically unchanged. This means that individuals are in the drivers seat when seeking employment. People who start at my regional minimum wage, seek continual learning and desire job growth will become assets to any business desirous of a stable workforce. These businesses will enjoy low employee turnover and will be able to channel startup training costs into better and better wages.

Minimum wage jobs are only a beginning. My locally defined minimum wage provides hope that we will never again be considered a low-wage, poorly trained area waiting eagerly for third world jobs!

Tom Fitzgerald is chief executive officer of Nevadaworks.