Business owners say minimum wage could push up prices

By MICHAEL KRANSZ
Capital News Service
LANSING — Some Michigan small businesses that pay employees more than the state’s minimum wage say the recent increase could drive costs up for their customers.
It rose from $7.40 to $8.15 on Sept. 1 in the first of four phases leading to $9.20 in 2018 for workers who don’t get tips.
Mike Valle, owner of Valle’s Village Market in Marquette, said the increase could translate into a price-hike domino effect, even though he is already paying employees more.

“I can’t say right now, but I’m sure it’s going to have an impact on the prices,” Valle said. “If things cost more, it stands to reason the price will go up.”
First, Valle said, suppliers with minimum wage earners could charge him more to cover their own increased costs. Then, he said, to offset the higher expenditures, he would have to raise prices on his goods, offloading the cost on customers.
Similarly, Darric Newman, co-owner of Folgarelli’s Market & Wine Shop in Traverse City, said although he pays his employees above minimum wage, he believes rising costs related to higher pay “is just going to get passed onto the consumer.”
But increased labor costs aren’t the only thing dictating prices: There are utility rates, transportation costs and taxes, among other factors.
“Within the last 12 to 18 months, I’ve had to pay a lot closer attention to our invoices when our product arrives because I’m seeing regular price increases, more dramatic and frequent,” Newman said.
But Michigan AFL-CIO President Karla Swift said increased wages enable workers to go out and buy more.
“When workers earn more, their spending power increases,” Swift said in an emailed statement. “That leads to more sales and revenue for business, and more hiring and jobs for workers.”
But that extra cash in the pockets of workers has to come from somewhere, potentially small business owners and their customers, Small Business Association of Michigan (SBAM) Vice President Michael Rogers said.
“It’s not money that is conjured out of the air,” Rogers said. “A government-mandated increase, that has to be absorbed somewhere.”
SBAM President Rob Fowler said although the wage shift doesn’t affect all of the organization’s members directly, it will affect them all eventually.