LANSING - Policymakers and Monroe business owners are analyzing the impact of the $1.80-per-hour increase in the minimum wage.

Robert Swanson, director of the state's Department of Labor and Economic Growth, said the increase from $5.15 to $6.95 was necessary because the old minimum was too low.

"$5.15 an hour is only about $10,000 a year, and that is way below the poverty line, regardless of family size," he said.

Swanson said the change will have a positive on workers immediately, as will additional hourly rate increases of 20 cents in July 2007 and 25 cents in July 2008.     "This large number of people, somewhere between 90,000 and 450,000 depending on which of those levels you're looking at, are operating well below the poverty level even though they're working full time," he said.

Rich Knapp, owner of Buscemi's Pizza & Subs in Monroe, said the increase makes it hard for small businesses when they compete with larger chains.

"Right now I'm in a price war with Little Caesar's with the $5 large pizzas and I've had to raise my prices on those to $5.95 in order to respond to the higher cost," he said.

Knapp is not opposed to minimum wage increases but said the state has been too generous.

"I'm not opposed to an increase in the minimum wage but I think they went too far," Knapp said. "When you have such a large increase, the only thing that it could possibly do to the consumer is to increase their costs," he said. "We're in a state that is already struggling financially, and this is something that is going to hurt us more.'

In addition to higher prices, Knapp said he'll cut hours for his predominately part-time staff.

"I'm going to have to reduce hours and the people working are going to have to be more productive," Knapp said. The higher minimum wage will attract more qualified employees "and they will have to be able to do more work because I can't afford to have as many people here."

The increase has not affected all small business owners in the area.

Joel Whalen, co-owner of Yaeger's Shoes that has been open since 1846, said he starts his workers above minimum wage.

"I see both sides of this argument," he said. "People need to be paid a wage that allows them the ability to live, but this really doesn't hurt the large business in the same way it will the smaller ones."

Whalen said his business is doing well despite the economic climate because  it provides a service to the customers they don't receive everywhere.

"When someone comes into the store. we're able to provide them a service in sizing their foot and giving them the right shoe," Whalen said. "The businesses that provide services as well as a quality product are going to be the ones doing well.'

Paul Bukowski, director of political affairs for the Small Business Association of Michigan, said the organization opposed the minimum wage increase because it doesn't allow for small business to compete with larger chains.

"This is another government mandate that takes wages out of the control of the business owner," he said. "Once that happens, the market is no longer in control of the wages."

Bukowski said there could be problems for business owners who have workers that make near the floor.

"When the government comes and in determines a new minimum wage, the person who is making $2 over minimum wage is now making the minimum and wants an increase," Bukowski said. "They have to decide whether to keep the experienced worker and pay them more or to hire someone with no experience and pay them the same. That's what throws it all in a flux."

He said the increase places the burden on the consumer and does nothing to increase the amount of money in the state's economy.

"Ultimately, the person who pays for it is the consumer because the price goes up," Bukowski said. "If the wages go up and the prices go up, what's the point? With that, all you've done is create an inflationary increase with a net-zero sum."