Minimum wage hike squeezes employers

As federal rate rises, state’s increases 6.5 percent this week

And for employers already facing rising costs for energy and food, it’s not good news.

‘‘It’s certainly poor timing,” said Mike Kostinsky, owner of a pizza restaurant in Arbutus. ‘‘It goes along with all the tax increases that were poor timing. Everyone is just treading water right now. People come in and start working at minimum wage, and it bumps everyone else up at a time when it’s tough.”

Kostinsky said nearly all of his approximately 30 employees make more than $7 an hour and those with him the longest make even more.

‘‘But for someone making $7 an hour, all of a sudden that doesn’t seem that much to him and under the circumstances, it takes the base and ups it for everybody,” Kostinsky said. ‘‘It’s a very frustrating time. My goal is to cut my payroll without affecting service.”

Under federal law, most workers are paid either the state’s minimum wage or the federal government’s, whichever is higher. Until Thursday, Maryland’s minimum wage — $6.15 an hour — was higher than the federal government’s $5.85. Now, however, it is below the new $6.55 hourly minimum — and next July 24, the federal minimum rises to $7.25 an hour.

Exempted workers include baby sitters who work less than eight hours a week and earn less than $1,500 a year; employees who earn more than the minimum wage in tips; and employers who provide furnishings such as room and board, which may be considered part of the wages.

The wage hike comes when small-business owners are feeling the squeeze from higher gas prices, said economist and author Richard Bayer, COO of the business association The Five O'Clock Club.

‘‘It’s going to be difficult for businesses because they’re going to have to meet a higher payroll,” he said. Employers ‘‘will use more illegal immigrants because illegal immigrants are not subject to minimum wage because no one knows they’re there.”

Employers also will leave positions vacant and expect workers to work harder to compensate, rather than fill the vacancies, Bayer said.

Ellen Valentino, Maryland director of the National Federation of Independent Business, agreed.

‘‘Clearly when small business owners have to pay more in wages during difficult times it affects their cash flow,” Valentino said. ‘‘Do we think it’s an unfortunate time for this? We do. It’s always an unfortunate time to mandate to small-business owners what to pay their employees.”

Other employers, however, do not expect the new minimum wage to affect them.

‘‘We have no minimum-wage employees, so we are not directly affected. ... There’s an indirect upward pressure on everything with rising fuel costs and the corresponding cost of living, but the change does not have an immediate impact on us,” said Jim Rafferty, marketing manager of Welsh Construction Remodeling Co. in Baltimore.

Kostinsky said his pizzeria business has remained flat compared with last year.

‘‘I don’t begrudge people the money, but when you stretch out your payroll sometimes you have to be a miracle worker,” he said. ‘‘I’d like to be able to raise my employees’ wage based on their production. There are some people I’ve hired at minimum wage and they aren’t worth minimum wage. They come in, work a week and they quit. That’s just throwing my money in the trash can.”

The increase will probably end up adding between $20 and $50 to his weekly payroll.

‘‘That doesn’t sound like a lot, but it does add up,” he said.