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The blow was softer than it might have been on many employers because they already pay more than the new $4.75-an-hour rate since the labor market is so tight. Hugh Schmidt, a McDonald's Corp. franchisee in Vail, Colo., says he starts workers at $6.50 an hour and bumps them up to $7 right away because the slopes, hotels and T-shirt shops all vie for the same people. "Supply and demand matters more than what the minimum-wage mandate is," he says.

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