The Rising Tide of Minimum Wage

By BLAIR AND BRUCE JOHANSON

Coastal dwellers are very familiar with rising and falling ocean tides. Those making a living or accessing the ocean for pleasure boating keep an eye on the factors that impact incoming and outgoing tides. Local coastal news and websites provide daily ocean tide levels on a 24 hour basis. Human Resources and compensation professionals are experiencing rising tides associated with local, regional and national employee pay minimums. These professionals are staying tuned to several factors mentioned below that are raising the tide of minimum wages.

Federal, State and Local Minimum Wage Legislation

One of the leading drivers for increasing minimum wage is legislation initiated by the Biden Administration on April 27, 2021 which requires federal contractors to be paid a minimum of $15 or more per hour. There are approximately five million individuals representing the federal contract employees. Employees at the minimum before this Executive Order was enacted were being paid $10.95 per hour, so an increase to $15.00 per hour represents an increase in annual wages of $8,424 per employee. More than 25 states have or will have minimum wage increases during the calendar year of 2021. There are 18 states paying the $7.25 Federal minimum wage and two states paying $5.15 unless the employer is subject to Fair Labor Standards Act (FLSA) and must pay the $7.25 Federal minimum wage. The remaining 30 states and Washington, D.C. have a minimum per hour wage that ranges from $8.75 to $15.20. It is probably no surprise that Washington, D.C. is the winner of the highest per hour minimum at the $15.20 level. California employers with over 26 or more employees are paying $14 and this figure drops down to $13 with 25 or less employees. The next highest two states are Washington and Massachusetts at $13.69 and $13.50 respectively. The states at $8.75 include Montana, Nevada, and West Virginia. The average per hour rate for all 50 states and Washington, D.C. based on the 2021 calendar increases is around $9.30 per hour. Throughout the U.S., there are also several local minimum wage ordinances that exceed their statewide minimum.

Private Sector Minimum Wage Initiatives

Beyond federal and state minimum hourly wages, the next big sector raising the minimum wage tide is the corporate and business sector. Several industry leaders are taking the initiative to raise minimum wages to $13, $15, $20 and more. The following are just a few examples of many. • Bank of America March, 2020 $20 per hour minimum and $25 per hour minimum by 2025 • Thomas M. Rutledge, CEO Charter Communications $20 per hour minimum in 2021

• Amazon - Starting average more than $17 per hour • Best Buy August, 2020 $15 Minimum and average hourly wages of $17.67 • Costco $16 and Target $15 • Virginia C Drosos, CEO Signet Jewelers, $15 Minimum (Kay Jewelers and Zales) • Chipotle Mexican Grill $11 to $18 starting wage • McDonalds May, 2021 Average wage $13 per hour • Eugene I. Lee, CEO Olive Garden. January, 2022 $11

Minimum and January, 2023 $12 per hour. Average tipped employee earns greater than $20 per hour • Walmart $11 minimum per hour - Pickers $13 per hour • Marvin Ellison, CEO of Lowe’s - 2019 to 2020 $1.4

Billion investment in incremental wages - one of the highest wage retailers for hourly associates • Kevin R. Johnson, CEO Starbucks - Fairly significant increase in wage and benefits

Skilled Labor Supply and Demand

Another area where pressure is pushing the minimum wage has to do with supply and demand for various trade positions including master electricians, plumbers and journeymen as well as CDL drivers. With the mass retirements going on with the baby boomer generation, several of these positions have been slow to back fill with the younger generations, thus creating a shortage. As with any shortage, wages tend to increase and there is no exception with these positions. A March 18, 2021 Business Wire article covered the shortage of skilled trade workers based on a study completed by PeopleReady Skilled Trades organization. The following quote about supply and demand issues for skilled laborers was noted in the Business Wire article. “The skilled trades are in dire need of workers right now, with a particularly high demand for apprentice-level and skilled labor positions. These are steady, well-paying jobs that hold a bright future, even in an unpredictable economic climate,” said Jill Quinn, executive leader of PeopleReady Skilled Trades. “For the millions of Americans who are struggling in their job hunt right now, our message is simple: Consider a career in the skilled trades.” Public and private organizations and businesses are offering higher wages to attract and retain competent staff. In addition, they are offering internal and external trades training and education to move entry apprentices into journey level and even master level technicians. Most of these organizations and business are covering the cost of the training and education and encouraging employees to take advantage of these benefits so they can meet critical skills needed by the employer to sustain their operations and services. For some of our municipal clients, an employee entering a skilled trades position can increase their base pay by 15 to 30% from apprentice to level three technician jobs.

Living Wage

For the last several years, some organizations have committed to ensuring that their employees are paid at least at a “Living Wage” level. Wikipedia defines the living wage as the minimum income necessary for a worker to meet their basic needs without government subsidies. Some of our clients have requested us to include the living wage concept and terminology in their compensation and benefits philosophy statement. A valuable resource that we have been using for some time is the MIT online Living Wage calculator. As mentioned on their landing page, the answer to “What is the living wage calculator? Families and individuals working in low-wage jobs make insufficient income to meet minimum standards given the local cost of living. We developed a living wage calculator to estimate the cost of living in your community or region based on typical expenses. The tool helps individuals, communities, and employers determine a local wage rate that allows residents to meet minimum standards of living.” The data provided is down to the County level within a state and lists 12 hourly living wage categories from one adult with no children to two adults with three children. The only drawback with this data is it is updated once a year so depending on when you review this resource, the data may need to be brought to current.

Rising Inflation

One remaining factor that has been around for a while that is going to raise the tide for minimum wage is inflation. In a recent SHRM article written by Stephen Miller and released on August 2, 2021, Mr. Miller sites several sources inclusive of the Conference Board, Wyatt Towers Watson (WTW) and Federal Government Agencies that have completed several studies that indicate that inflation costs will exceed pay increases in 2021 and 2022. The Federal government releases monthly and annual year over year cost inflation percentages. Last year’s inflation percentage was 1.7% and the year over year inflation for June, 2021 was 5.4%. Most of the professional organizations and published compensation studies are projecting a return of 3% for salary increase budgets for 2022. Rising costs in inflation will definitely have an impact on rising minimum wage tides. We are going to end this article by providing an email from one of our clients about the difficulty of filling positions at their organization. He stated, “We are having a hard time hiring for our lowest level jobs. I have a custodian who makes $11.09 an hour. With minimum wage where it is now, what is being proposed for the future is making it even worse. Is there some form of data for what our lowest or starting pay should be in comparison to minimum wage? We have positions open in Road and Park right now that we cannot fill. Private businesses can use bonuses and other incentives which we cannot. If Target is paying $15 an hour to work in the A/C and we have a job at $11 working outside in the heat, which one would they choose?” Our recommendation to this client is to start paying the lowest position around $13.50 to $14.00 per hour and start budgeting for a minimum of $15.00 over the next couple of years. This recommendation will be harder for the organizations and businesses where minimum wage requirements are still in the single digit range. There are several factors, some expressed in this article that will raise the minimum wage average to $15.00 and beyond over the next several years. The rising tide of minimum wage is here to stay and organizations need to provide a life raft for their most valuable assets.

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