The Minimum Wage Landscape is Changing | DCR Workforce Blog

The Minimum Wage Landscape is Changing

minimum wageThe Public Health Law Research program has mapped the wage laws since 1980 to provide insights into the effects of higher wages on factors like housing, education and health and well-being. Despite this data, we see little or no consensus among those who would predict the outcome of an increase in minimum wage. It is a topic which always results in acrimonious debate, with one side making predictions about increased prices, lowered hiring, business relocation away from cities, and a damaged economy; while the other predicts improved employee experience and a stronger economy.

IKEA, the furniture retailer, has declared that their base rate for wage will be dynamically linked to the Living Wage Calculator provided by MIT for all their locations in America, making base pay variable by location – but as IKEA pays $9.20 on average as of today, this is good news for workers in some locations who could potentially earn $13 per hour. IKEA explained this move as a strategic initiative to give them competitive advantage as an employer, attract better talent, reduce recruitment and training costs, and encourage better retention. A similar increase by other companies is said to have witnessed a 10% increase in job applications.

This is a great deal of discussion on both sides of this issue:

Support:

  • Proponents claim that better wages increase employee retention and productivity as they stay longer and gain more expertise.
  • 73% of Americans feel that the federal minimum wage is too low.
  • Labor unions in Alabama want the base wage of ‘tipped’ employees in hotels, bars and restaurants to be increased by 2.32 times.
  • According to a CareerBuilder survey on salaries, 65% of full time workers feel that their salaries are not what they desire; which interestingly is close to the 63% disengaged workers estimated by a Gallup survey. Many temporary workers also feel that their pay is insufficient.
  • A Harris Poll survey asked 3,372 full-time workers and 2,188 HR professionals to share the income they need to feel successful and received the following responses. (Note: Responses exceed 100 percent due to rounding.) :
    • Under $50,000: 25 percent
    • $50,000-69,999: 30 percent
    • $70,000-99,999: 25 percent
    • $100,000-149,999: 15 percent
    • $150,000-199,999: 4 percent
    • $200,000 or more: 4 percent

In other words, 55% are happy with income less than $70000, while 80% are happy with incomes less than $100,000.

  • The Center for Economic & Policy Research (CEPR) reported that employment growth has been faster in states where the minimum wage went up.

Those opposed to increasing the minimum wage offer these arguments:

  • 43% of employers responding to a survey in Seattle said they would limit all future expansions in the city if the minimum wage increases.
  • Some believe we are disadvantaging certain areas of the country with localized minimum wages, which incentivize businesses to move to areas with lower wages while workers migrate to locations with higher wages.
  • Community-based businesses which employ a high number of minimum wage workers – like restaurants, retail stores, and personal service companies – are unable to relocate. They claim that the rise in the minimum wage erodes profit, resulting in a spike in business failures.
  • The Bureau of Labor Statistics data show that about half of the people who currently earn the federal minimum wage are between the ages of 16 and 24. And, according to the Federal Reserve Board, the prediction of a reduction in labor demand applies unambiguously only to these less-skilled workers who typically are not the primary wage earner in the household.

All but the five states of Louisiana, Alabama, Mississippi, South Carolina and Tennessee have enacted laws increasing State-level minimum wage limits, and some cities have also chosen to increase them at their level. Will a voluntary agreement to increase the minimum wages translate to better employee loyalty, better brand image and higher productivity?

Is a living wage an economic imperative and a moral obligation; or a misdirected move with negative repercussions on the economy? Only time can tell!


Disclaimer:
The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.