Commentary: The media dubbed 2014 the year of the minimum wage, following a wave of protests by minimum wage workers demanding higher pay. In his 2014 State of the Union address, President Obama called on Congress to raise the national minimum wage from $7.25 to $10.10 an hour, and soon after signed an Executive Order to raise the minimum wage to $10.10 for individuals working on new federal government service contracts. The wage rallies continue in 2015, triggering multiple states, cities and other localities to move wages well above the federal minimum.
Shifting wage minimums the new normal
- To-date, 29 states and the District of Columbia have minimum wages above the federal minimum.
- The following 12 states and the District of Columbia have already increased their minimum wage and/or have scheduled stepped increases to take effect from 2016 to 2018: Alaska, Arkansas, California, Connecticut, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Vermont, and West Virginia.
- Currently, these 10 states require state officials to evaluate the minimum wage on an annual basis: Arizona, Colorado, Florida, Missouri, Montana, Nevada, New Jersey, Ohio, Oregon, and Washington.
- After 2015, another five states and the District of Columbia will examine minimum pay rates each year: Alaska, Michigan, Minnesota, South Dakota and Vermont.
Compliance headaches
Employers with workers in multiple states face considerable challenges ahead. Regardless of the federal minimum wage, companies must continue to comply with each states wage laws or face hefty fines and other penalties. Employers will further be impacted by changes in wage minimums ordered by cities and local municipalities. For example, the Los Angeles City Council recently voted to increase the minimum wage from the states current $9 to $15 an hour by 2020. San Francisco will require a $15 hourly minimum for all employers by 2018. While in Washington State, Seattle will require employers with 500 workers or more to pay $15 by 2017.
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Companies, especially those with employees in multiple cities and states, will have to keep a very close eye on the changing laws and fully understand how or if changes will affect the cost of doing business.
Jury still out
Surveys indicate that the public is largely in favor of increasing hourly wage minimums, viewing it as a tool to raise low-income workers out of poverty, and the business community has taken note.
Industry giants such as McDonalds, Walmart, Aetna, Target and Starbucks have already pledged to increase minimum hourly pay to their workers. The U.S. Department of Labor reports that more than three out of five small business owners also support increasing the minimum wage. They believe it will increase consumer purchasing power and businesses would benefit from lower employee turnover, increased productivity and customer satisfaction.
However, some lawmakers and economists see it differently. Many argue that raising the minimum wage will cause businesses to hire fewer workers and look for ways to off-set increased labor costs in the form of higher prices for consumers. The public debate on wage laws only adds to the complexity of the issue for employers and workers.
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The bottom line for all companies is that they must closely monitor the changing laws to ensure compliance. They may also need to think more broadly about their human capital strategy and the true costs and benefits involved in keeping labor costs low vs. paying people more than the law requires.
Jay Starkman is CEO of Engage PEO. Ryan Hollander is assistant general counsel.
