Increases in Minimum Wage at the State and Local levels

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By Charles Read Last updated May 25, 2020

The State and Local minimum wage requirements increased in at least twenty-one states with the start of 2020. Alaska, Florida, Minnesota, Montana, Ohio, South Dakota, and Vermont (7) had cost of living increases that took place automatically based on inflation and cost of living. Arizona, Arkansas, California, Colorado, Illinois, Maine, Maryland, Massachusetts, Michigan, Missouri, New Jersey, New Mexico, New York, and Washington (14) had increases in minimum wage rates mandated by legislation.

There are a number of localities that have implemented or increased local minimum wage requirements for 2020. There are others under consideration and undoubtedly will be passed and implemented later in the year and for future years.

A number of jurisdictions have now set different minimum wages based on type or size of business; and even if the business supplies benefits or not.

There are several States that have prohibited municipalities in the State from passing minimum wage laws in excess of the State minimum wage law. This helps minimize the problems for an employer within that State. It does not help between states of course.

Whether you believe in a minimum wage or if you believe the Federal minimum wage is too low, all of this variety makes life more difficult for the employer who pays payroll. For many small businesses it is just a matter of what the local and or State wage is. If you operate in multiple jurisdictions it can be quite difficult to keep up. It does not look like it is going to get better any time soon. If you have multiple locations in different minimum wage jurisdictions you have to keep up with who works where and when, if you don’t pay at least the higher minimum wage over all. Then you will have to look at your pricing to include a higher minimum wage in calculating your prices. So your labor, revenue and tax models will vary based on location. You would also have to justify paying less wages based on where the employee was working. Even if equal pay for equal work under the law is not a problem I suspect that morale for the employees making less money that their coworkers in a different jurisdiction that may literally be across the street could be a problem.

Thought the US House of Representatives passed a minimum wage bill in 2019 and will probably pass another one for 2020. The US Senate seems to have no appetite to debate let alone pass such an increase.

There is a lot of discussion on the Pros and Cons of a minimum wage and if there is one what should it be. The facts, like all facts, can be distorted or cherry picked to prove one point of view over another. There are Pros and Cons backed up by a certain set of facts designed to prove that sides point.

But there are some facts to look at.

The real value of the federal minimum wage has declined 24 percent since 1968. Today the federal minimum wage of $7.25 at a regular work year of 2080 hours equals $15,080.00 income. Which is well below the Federal Poverty level for 2020 of $ 21,330 for a family of three persons. But above the Federal poverty level for a single person which is $12,490.00

If there are two adults working full time at minimum wage the family income would be $30,160.00 which is ten dollars below the Federal poverty level for a family of five.

The first minimum wage law was passed in 1938. The minimum wage was set at 25 cents per hour. Adjusted for inflation it would be $4.45 today well below the current Federal minimum wage.

In 1979 13% of US workers were paid at minimum wage. It has continued to drop over the years. In 2013 the percentage had dropped to 4% of workers.

For the reporting year of 2018 the Bureau of Labor Statistics (BLS), reported that 1.7 million workers, or approximately 1.2% of all hourly and salary workers in the US (not including self-employed workers) earned wages at or below the federal minimum wage of $7.25. This included a number of wait staff that were paid wages of $2.13 and made tips that equaled or in most cases exceeded minimum wage, sometimes by huge amounts.

How much of the decrease in minimum wage employees is due to States and localities passing higher minimum wage rates and how much is due to innate economic activity is a matter of opinion.

$49% of the wage earners at minimum wage or less were under 25 years of age. This would include teenagers at their first job and summer work. The other 51% is spread over all other ages.

I run a national scope payroll services provider. I had my staff look at our clients. The only workers making minimum wage or less that we could find was wait staff employees who were also tipped, again many making more than minimum wage and in some cases much more. In the DFW area where we are located you can’t hire anyone for minimum wage of $7.25 to do anything. The average Day Labor wage in Dallas is over $32,000.00 per year.

In conclusion, unless the Federal minimum wage is raised to exceed all state and municipal minimum wage rate, which I do not expect will happen any time soon if ever, the problems of working with multiple minimum wages rates will continue. Where it will be the biggest problem is where the mandated rates are above the real economic rate for labor and business will be looking to minimize the excess economic wages. They will be tempted to move or to innovate with technology to minimize the number of workers needed. You can already see technology replacing low skill workers, an example is ordering kiosk’s at McDonald’s replace cashiers. This kind of innovation is only the start.

Bureau of Labor Statistics HR Tech HR Technology payroll services U.S. Wage Wage and Hour Laws