By Eric Boehm | Watchdog.org
MINNEAPOLIS – A chain of Twin Cities pizzerias was briefly thrust into the national spotlight Tuesday during President Obama‘s State of the Union address.
Punch Pizza founder and co-owner John Soranno and employee Nick Shute attended the speech in Washington, D.C., as guests of first lady Michelle Obama. Near the middle of the address, the president pointed them out and praised their recent decision to raise the wages of all employees at Punch Pizza to at least $10 per hour, which Punch announced in early December.
PUNCH PIZZA: It now has more than 300 employees and eight locations in the Twin Cities, but Punch Pizza started at this location in the Highland Park neighborhood of St. Paul.
“John just gave his employees a raise to 10 bucks an hour, and that’s a decision that has eased their financial stress and boosted their morale,” Obama said.
But after praising Punch Pizza for a decision its management made voluntarily, Obama issued a call to mayors, governors and state lawmakers, asking them to “take this on” – this, being the minimum wage.
He quickly followed that by calling for an increase in the federal minimum wage, which has been $7.25 per hour since it was last raised in 2009.
“This will help families. It will give businesses customers with more money to spend,” said Obama. “So say yes. Give America a raise.”
But there is a clear disconnect between the decision by the owners and managers of Punch Pizza to pay their employees more and a national mandate for all businesses, said James Sherk, a senior policy analysis for economic issues at the Heritage Foundation, a conservative think tank in Washington, D.C., that generally opposes increases to the minimum wage.
“Any company that is choosing to do this voluntarily is not going to be setting the new wage rate above the value of what their workers are producing, so they’re not going to be looking at losing money by paying the workers more than what they are producing,” he said Tuesday.
Forcing businesses to pay workers $10.10 per hour for workers who are only producing $9 per hour means those businesses will either lose money or will lay off those workers in search of more productive ones, he said.
CAN’T BUY THAT KIND OF ADVERTISING: President Obama talked about Punch Pizza during the 2014 State of the Union address on Tuesday night in Washington.
In a statement released Tuesday, the co-owners of Punch Pizza said they decided to pay their employees more because it would be good for the business, not to attract political attention.
The higher pay will cost more than $3 million over the next 10 years, they said, but the investment in their employees would pay off.
“We are honored to be recognized by the president and first lady,” Soranno said. “As we continue to grow Punch we recognize that only the most dedicated employees will position us to compete and maintain the highest quality food and the best service in the market.”
Punch Pizza has grown from a single location in the St. Paul neighborhood of Highland Park to a chain with eight locations and 300 employees throughout the Twin Cities metro area offering a fast-food style pizza. Soranno and fellow co-owner John Punkett said they plan to continue growing.
And if paying their employees $10 per hour helps that growth, then it’s the right decision. But the right decision for one small business isn’t going to be the right decision for another.
Minimum wage laws take that choice out of the hands of the next Punch Pizza.
And increasing the national minimum wage could actually hurt those employers – like Punch Pizza – that now pay higher-than-market-value, Sherk said.
NOT AS GOOD AS IT SOUNDS: Increasing the minimum wage could actually hurt businesses like Punch Pizza that voluntarily pay their workers more, says James Sherk of the Heritage Foundation.
Companies that pay higher wages are able to attract better workers and keep them, which avoids costly turnover issues, he said.
“If everyone does it, that benefit goes away,” Sherk said.
Already, 30 states have minimum wage laws setting wages higher than the federal rate. Even if the federal government doesn’t increase the minimum wage to Obama’s preferred rate of $10.10, the Minnesota state government might require businesses to spend more on labor.
Bills now being considered by the state Legislature would raise Minnesota’s minimum wage to $9.50 from the current $7.25 per hour.
That’s a drastic increase that would hurt many Minnesota businesses and employees, said Mike Hickey, director of the Minnesota chapter of the National Federation of Independent Businesses, which represents small businesses in the state.
Hickey said the increase would probably hurt some of the workers it is intended to help, since workers who lack the skills to get a job at $7.25 per hour would be unlikely to find an employer willing to hire them for $9.50 per hour. More likely, he says, businesses would look for older, more experienced workers instead of teenagers and others who are just starting out in the work force.
But if employers like Punch Pizza’s Sorranno and Punkett can afford to pay their workers more, good for them.
“If they can afford to do it, and they think it will help their company, that’s great,” Hickey said. “They’ll be more likely to attract good workers and keep them.”
But there’s a big difference between paying people more because you can and doing it because the government says you must.
Boehm is a reporter for Watchdog.org and can be reached at EBoehm@Watchdog.org. Follow @EricBoehm87 and @WatchdogOrg on Twitter for more.
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