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Talking Politics: How Proposition B Could Affect Business Owners

On Nov. 6, Missourians will have a chance to decide if they want to raise the state minimum wage. Proposition B would increase the current $7.85 an hour minimum to $8.60 by next year. It would increase the state minimum wage 85 cents each year until it reaches $12 hour by the year 2023.

So how might this affect Missouri’s low-wage workers and business owners?

Dave Elman, the owner of Fretboard Coffee in downtown Columbia thinks it would help.

Elman took a financial risk to open Fretboard, but he says his business model has and always will include investing in his employees. For Elman, paying higher wages means less turnover and better results.

“I’m very particular, we have a certain way of doing things. I need and want people who want to be there and are excited to be there and bring a certain energy,” Elman says. “If you pay people the bare minimum that you’re able to by law then they’re not really going to bring the energy. They’re not going to be any more committed to you than they need to be.”

That’s why Elman has joined over 600 Missouri business owners and executives in publicly endorsing Missouri’s Proposition B. The amendment is one of several on the Nov. 6 ballot, and proposes a gradual 85 cent per year increase to the minimum wage over the next five years.

It’s been about 12 years since Missourians voted to raise the wage floor. And now Missouri is one of 29 states where the lowest-paid workers earn more than the federal minimum of $7.25.

Tony Wyche is a spokesperson for Raise Up Missouri — the political action committee that spearhead the initiative. He says $7.85 still isn’t enough to live on in 2018.

“The cost of groceries, housing, health care and other basics have gone up for years, but wages haven’t kept pace,” Wyche says. “So someone in Missouri working full time for minimum wage only earns $314 a week which is nowhere near enough to cover basic food and rent.”

But skeptics say legislating wages will hurt business owners more than it will help workers. Patrick Ishmael is the director of government accountability at the conservative-leaning economic policy think tank the Show-Me Institute which recently produced a study that highlight to unintended consequence of Proposition B. Ishmael says higher wages can also raise prices and reduce the number of jobs.

“What you end up seeing is that when you raise the cost of labor there is an incentive to do a few things,” Ishmael says. “Among them to reduce the number of hours that you might offer for people to work, reduce jobs, it increases the likelihood of automation and it also tends to press up the cost up of the service or item you’re providing.”

So which interpretation of Proposition B’s potential effects is more accurate? University of Missouri professor of economics Peter Meuser says it all depends on the health of the economy, which is unpredictable.

“If we were to have a recession, even a moderate recession, then as the minimum wage increased according to the proposition then a substantial number of people could lose their jobs as a result,” Meuser says. “That would be quite different than if the economy continued to grow as it has over the past few years.”

Back at Fretboard Coffee, Elman looks out over the garage and patio he transformed into a growing small business.

“These people who I see all around town from other service jobs, the more money people have in their pocket the more they’re going to seek out local businesses,” Elman says. “So, I feel like the better people are paid, the more supportive they’re going to be of their local economy and local community.”

On Nov. 6, it’s up to voters to decide if they agree with Elman by voting either yes or no on Proposition B. But if it passes, Elman says he expects to see even more coffee drinkers at his shop.