How will the minimum wage hike affect you?

February 5, 2007

The House of Representatives recently passed a measure to increase the federal minimum wage to $7.25 an hour from its current rate of $5.15 an hour over a 26-month period. The Senate is expected to move swiftly to pass a similar measure. How will the hike affect chain and independent pharmacies?

Joseph Agnese, senior industry analyst at Standard & Poor's Equity Research in New York City, does not believe the minimum wage hike will have a negative impact on drugstore chains' bottom line. "A pharmacist's [salary] costs are much more significant than those of the clerks or other employees in the store who may be making minimum wage," he said. "I don't think the minimum wage increase will have that big of an impact on the larger chains, at least not as much as adding an extra pharmacist when it's needed. The pharmacist's salary is a big salary that has to be added to the store [budget] and made up through sales."

Richard Hastings, VP/senior retail sector analyst Smyth-Bernard Sands LLC, said, "The minimum wage hike is more of a nuisance than anything else, but national companies could see a slight increase in overall compensation costs. Luckily for the chain drug giants, CVS', Walgreens', and even Rite Aid's comparable sales have been and should remain positive, helping to offset the potential impact of slight increases in compensation costs per store." He added that smaller, independent pharmacies could face more of an impact, since the minimum wage bill could change availability of part-time and hourly workers and trigger the need to increase the hourly pay rate to recruit and retain hourly workers.

David Gutekunst, R.Ph., pharmacist in charge at Landis Supermarket's Pharmacy, Vernfield, Pa., said the impending hike will make it more difficult for smaller chains to hire part-time clerks. He said that he has been considering hiring a part-time clerk, but "the bill will delay my hiring counter help. If it's questionable for me to hire or not, I'm probably not going to hire. There's a big difference between paying someone $5-something an hour and paying someone $7-something an hour. Over a two-year period, it's about a 40% increase."

Jeff Kirchner, R.Ph., owner of Streu's Pharmacy in Green Bay, Wis., said that his 60 employees, including maintenance employees and drivers, already all earn more than $7 an hour. "Our starting salary for almost all our positions is over $7 because even high school students looking for jobs can get that much delivering pizza. You have to be paying above $7.25 to attract people."