United States: More Minimum Wage Increases Approaching

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Talks of raising the federal minimum wage, even higher than most state minimum wages, have been discussed frequently in the media this year. Some argue that increasing the federal minimum wage to over $10.00 per hour would benefit those 45 million U.S. workers projected to be below the poverty line in 2016. Recent studies suggest that the majority of U.S. workers who earn minimum wage are younger in age. Nearly 71% of the estimated 3 million hourly employed persons who earned at or below the federal minimum in 2014 were between the age of 16 and 34, according to the Bureau of Labor Statistics. Suffice it to say, most of these individuals are believed to be single with no dependents.

A Pew Research Center report showed 30% of near minimum wage workers who make more than $7.25 per hour (but less than $10.00 hourly) are white, younger than 30, and the majority had no more than a high school education. Furthermore, 18% of the near minimum wage earners in the nation are in the restaurant and food service industry. These workers are employed most commonly as cashiers, retail salespeople and cooks. A recent University study found that raising wages for limited-service restaurant workers would in turn raise prices to consumers by over 4%, in order to balance the expense to the employers.

Many view the minimum wage, whether state or federal, as a training or entry level job wage for young, inexperienced or low-skilled workers. Concerns that the proposed raises to minimum wages throughout the country could do more harm than good are also being discussed, particularly the proposals that would increase the federal minimum wage to between $10.00 and $15.00 an hour. While this would benefit only an estimated one million of the anticipated 45 million workers below the poverty line, it would also benefit mainly those who support only themselves, according to recent reports.

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Another point is that the raising of the minimum wage does not guarantee jobs. It simply guarantees that those who manage to secure a job will be paid accordingly. To cut overhead, employers (especially those employers running small businesses) may cut staff and expect fewer workers to maintain the current level of productivity. This will in turn have the potential to create higher attrition rates. Employers may also experience an uptick in workers calling in sick due to fatigue, lack of motivation or because they feel they are owed a reprieve from a more stressful work environment.

Of the 19 states that raised their minimum wage in 2013, each $1 increase was directly related to a nearly 1.5% increase in the unemployment rate in that market. Additionally, a decrease of over 4% in net job growth was observed amongst teens. This study concluded that high state minimum wages increased unemployment, particularly amongst teens and other inexperienced workers, and reduced job growth overall. Employers employed fewer workers than they could have afforded, had the minimum wages remained the same. They also selected the most experienced or older workers who were perceived to be more highly skilled and reliable.

While the United States federal minimum wage is set at $7.25 per hour, 29 states and the District of Columbia, have minimum wages above that. The District of Columbia recently increased the minimum wage to $10.50 an hour on July 1, 2015. The increase makes this the first jurisdiction to cross the $10.00 mark. Delaware and Maryland also saw increases in mid-2015 to $8.25 per hour. In August, the state of Minnesota raised minimum wages paid by large employers to $9.00 an hour, with another $0.50 increase scheduled to follow on August 1, 2016. Similarly the Minnesota minimum wage, paid by small employers, was raised to $7.25 per hour on August 1, 2015, and will rise again to $7.75 per hour on August 1, 2016.

More state minimum wages increases go into effect prior to the end of the year by West Virginia and New York. On December 31, 2015, the minimum wage in New York will increase by $0.25 to an even $9.00 per hour, while West Virginia will see an increase of $0.75, to $8.75 per hour. On January 1, 2016, Alaska, Arkansas, California, Connecticut, Hawaii, Massachusetts, Michigan, Nebraska, Rhode Island and Vermont will all increase the state minimum wage. California and Massachusetts will have the highest minimum wage out of these states, at $10.00 per hour, making them the first states to reach a double-digit minimum wage.

Many states have exceptions or provisions associated with their minimum wages, or lack thereof. Five states have yet to adopt state minimum wages altogether. Those states with no state minimum wage in place include Alabama, Louisiana, Mississippi, South Carolina and Tennessee. The state of Georgia maintains a state minimum wage of $5.15 per hour. Georgia state employees covered under the federal Fair Labor Standards Act are subject to the federal minimum wage of $7.25 an hour. However, those employees who are not covered under the FLSA may be paid the state hourly minimum wage of $5.15 instead. Careful consideration should also be given to talent engaged in particular counties and jurisdictions throughout the United States. Some areas or cities may have minimum wages that differ from both the state and federal minimum wages.