A recent vote to support an increase in the federal minimum wage to $5.15 an hour has Republicans worrying about unemployment, while Ames businesses are worrying about having to raise prices.

The Senate voted 74-24 earlier this month in favor of backing the increase, which would raise the federal wage 90 cents. Democrats said about 131,000 Iowans, equivalent to 11 percent of the state’s work force, would see an increase in pay if the proposal becomes law. Iowa’s current minimum wage is $4.65 an hour, 40 cents above the federal wage.

Peter Orazem, economics professor, said because the state of Iowa already has a higher minimum wage than the federal minimum wage level, this potential increase will initially have a negligible effect. Instead of having to give employees an extra 90 cents as many states will be required to do, Iowa will have to increase its employees’ salaries by only 50 cents.

“Everyone else will be raising wages more than Iowa. Iowa firms won’t be as advantageous as they were,” Orazem said.

Several Ames businesses said the increase would affect not only the consumers, but the employees as well.

“If the wage does go up to $5.15, it’ll be passed right on to the customers,” said Bill Cole, store manager of Burger King, 209 Lincoln Way.

David Metcalf, owner of The Ark Pet Shop, 118 Hayward Ave., agreed and said that keeping his employee’s wages above the Iowa minimum wage is a prime concern.

“I don’t have any extra help right now, yet I may see the need to cut back on employment,” Metcalf said. “If I have to cut back on hours, I may have to downsize my business.”

Cole said he believes his business will have a more difficult time finding employees if the increase is signed into law because the store will have an equally difficult time keeping wages above the minimum.

“We’re not planning to cut back,” Cole said. “We’re paying above the Iowa minimum just to get employees, so cutting back is not much of a concern to us.”

Joanie Lobka, owner of Ames Greenhouse and Floral, 3011 S. Duff Ave., also pays above the Iowa minimum wage, and said she believes it is the larger businesses that may suffer with the increase. She said she believes the increase will “simply spread costs out across the board.”

“Employee benefits are what make the costs of products and services increase,” Lobka said. “If wages go up, so does workman’s compensation, and you have to pay for it somehow.”

The federal minimum wage was last increased 45 cents, from $3.80 to $4.25 an hour, in 1991. Metcalf said he believes the economy was easier to work with during that transition.

“I don’t remember raising prices,” Metcalf said. “We still increased wages further. Back then, we had a cushion and focused mainly on cutting out the frivolous extras.”

Orazem recently finished a study on the effects of the last minimum wage increase the state imposed between 1990 and 1992. He said that when Iowa raised minimum wage relative to its surrounding states, there was about a 6 percent reduction in employment for low-skill wage labor.

“The rule of thumb generally is that a 10 percent increase in minimum wage causes a 1 to 3 percent decrease in, say, teenage labor. You’re going to get cuts in employment opportunities,” Orazem said.

He said even more significant than the changes in the labor force is the decrease in the number of hours employees work.

“Some firms will cut back in unemployment, but many others will cut back in the amount of hours they will employ the lower skilled laborers,” Orazem said.

He said those effects are there whether the politicians like it or not. He said the real argument is how much employment is lost and, for the groups affected, do they gain more from the wage increase than they lose from the loss of hours.

Orazem said even though there may be job reductions, the target group generally gains more from the wage increase.

“The target group gains more from the wage increase, though, some people will not be able to find jobs as a result ,” Orazem said.

The study showed that minimum wage increases also reduce the number of firms, but increase the average size of firms remaining in business.