Employers Respond to 14 State Minimum Wage Increases This Week

Following last year’s nationwide efforts to push for a $15 Minimum Wage, fourteen states raised their minimum pay for hourly workers this week. The increases ranged from 5 cents (in South Dakota) to a full dollar (in Alaska, California, Massachusetts, and Nebraska).  While most of the states did incremental increases that ended in fives or tens, Colorado implemented an 8 cent increase – to $8.31 per hour.

A table of each state’s increases is provided below. But in addition to adjusting pay rates for minimum wage workers, employers across the country say they are taking some unique actions.

Watching Overtime Closely

With new rules anticipated in 2016 that would update the Department of Labor/Fair Labor Standards Act’s overtime requirements for exempt workers, many employers I’ve spoken with are already casting a sharper eye on the hours their team members’ work.  As minimum wage goes up, the cost of overtime pay also increases – which I expect will put an increased emphasis on watching out for unnecessarily overtime, and better adherence to scheduling a 40-hour workweek. 

Reducing Hours

When New York passed a 70% increase in the hourly wage of fast food workers, the operator of three Tropic Smoothie locations on Long Island reported that she “envisioned having less people per shift” to counteract the cost increase.

Also in New York, legislators have indicated that an increased minimum wage could result in employers reducing hours, cautioning that a minimum wage plan "needs careful review."

Cutting Jobs

In 2015, Seattle raised minimum wage to $15 per hour – and some reported a loss in restaurant jobs that was the “largest since the Great Recession.” 

Avoiding Any Changes

Still, some employers have shied away from these reduction methods, adhering to the maxim “you can’t shrink your way to greatness.”  Commitments to customer satisfaction mean that there is a lower threshold beyond which service levels decline. 

Fast food diners at a place that is understaffed will eventually decide that waiting lines are too long, and go somewhere else to eat.  Shoppers in stores without enough floor coverage may not get the assistance that would have convinced them to buy an additional item – or track down an item in a different color or size. 

In both instances, a decision to save a dollar or two in a given hour’s wage suffer loss of sales that are much greater.

For other employers, being “the employer of choice” is a key competitive advantage – even if they employ low-wage workers.  When employees are unhappy with their schedules, have too few hours, or feel that their hours and wages are being too tightly managed, they may leave for another job – leaving their previous employer with the costs of recruiting and retraining another worker, and suffering productivity losses as the new employee comes up to speed.

In high-service environments, an employee whose scheduling problems leave them unengaged may project their dissatisfaction to potential shoppers – and sales suffer as a result.

Finding the Balance

As new minimum wage rates go into effect, then, business owners have a special balancing act.  On one hand, they want to maintain profits – even grow them.  Yet, on the other hand, they want to reduce the increase in their payroll costs as a result of these new wages.

One approach is to get better at understanding when consumers are likely to be in the business, and exactly how much time it takes to serve them effectively.

Workforce management tools like Workplace Systems can be very effective at  predicting shopper traffic – with accuracy typically in the 98-99% range – even when considering “special days” like snow days, Christmas returns season, or other local influences.

At the same time, the systems can use a knowledge of labor standards – how long it takes to fold a sweater, or prepare a hamburger – to create a schedule that has the appropriate number of staff in place to fully serve guests, while minimizing wastage. 

And in an ever-changing landscape of federal and state rules regarding break and rest periods, or ACA eligibility, the systems can also help owners to stay compliant while adhering to tight labor budgets.

To learn more about how Workplace can assist you to respond to new pressures caused by an increase in the minimum wage, Request a Conversation.

Yet, I’m curious to hear your views.    Is the increased wage in these states changing your business strategy?  If so, what changes are you making? If not, what is your thinking? Please share your thoughts in the comments section below.  And if you found this post interesting, let me know by giving it a "thumbs up!" and sharing with your network.   

About:  JD Miller is a senior technology executive with a career spanning small startups and large public companies.  He uses this expertise to help organizations increase and sustain sales performance.  He is also active in Chicago’s philanthropic community, with a special interest in issues related to hunger and homelessness.

You can follow Dr. Miller on Twitter @JDM_Chicago