Out of Control Policy Blog

Ohio's Minimum Wage Follies

Ohio continues to re-write the book on the best ways to kill job creation in the middle of a recession. Undaunted by an unemployment rate of 11.1 percent in July 2009, the State of Ohio is now suing Columbus-area day-care centers because their owners supposedly paid less than the state's minimum wage. According to the Associated Press,

"The state has filed a $1.2 million dollar lawsuit accusing a business and its owners of paying less than the minimum wage at Columbus area daycare centers.

 "Attorney General Richard Cordray calls the suit filed Friday in Franklin County Common Pleas Court the largest minimum wage case in Ohio history.

"The lawsuit seeks back pay totaling more than $408,000 and nearly $817,000 in damages for 150 employees of Angels Learning Centers in and around Columbus.

"State officials first notified the company of the alleged violations in early March, following an investigation by the Ohio Department of Commerce."

Presumably, all those wages were gobbled up by fat-cat day-care center business owners although a typical day-care center generates about $500,000 per year. (For an illuminating analysis of the costs and revenues for six day-care centers in Ohio, see the report by the Human Services Policy Center for the State of Ohio here.) That's why profitable day-care operations have multiple locations--profit margins are too thin for many stand-alone operations to be economically viable. So, Ohio is well on its way to squeeze out whatever margins exist for these businesses.

Ohio's minimum wage is $7.30 per hour as of January 1, 2009 (although its unclear from the news report when the day-care center violations too place). Working 14 and 15 year olds are assured a minimum wage rate of $7.25 per hour. That translates into yearly full-time earnings of about $14,600 per year, excluding overtime.

And we haven't even started to factor in unemployment compensation, social security and medicare taxes born by the employer (let alone health insurance costs).

Samuel Staley is Research Fellow


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