For employers covered by the Fair Labor Standards Act (“FLSA”), the debate in Congress over the minimum wage has been a hot button issue. Interestingly, 29 states in addition to Washington D.C., have already enacted legislation that imposes a minimum wage rate that is higher than the minimum wage under existing federal law. Pennsylvania is one of only 14 states with a minimum wage matching the minimum established by federal law, which went into effect in July of 2009. In states without a minimum wage law or with a minimum wage lower than the federal minimum, the federal law controls and supersedes the state law for all employers covered by the federal law.
While the heated contest in Washington, D.C. continues over what constitutes a “living wage,” the last two years have shown steady growth in middle- and high-paying job markets as opposed to jobs paying minimum wage, according to the Department of Labor’s “2015 Round-Up: 10 Things to Know About the Labor Market.” For Dr. Heidi Shierholz, the Labor Department’s chief economist, “[t]his is a shift. In the first few years of the recovery, we were disproportionately adding low-wage jobs. But over the last two years, as the labor market has strengthened, the pattern of strong growth in very low-wage jobs has shifted to a pattern of strong growth in middle- and high-wage jobs.” Anecdotally, this trend, while not rooted in the federal government’s push to increase minimum wage requirements across the board, nonetheless illustrates that employers are finding value in paying higher wages.
Why pay higher wages to low-skilled positions if you don’t have to?
Although many smaller businesses shudder at the thought of a new law requiring significantly higher hourly wages, one of the tangible benefits to taking the plunge early and raising the minimum wage rate for low-skilled positions is the ability to phase in stepped raises over a period of time (provided the federal government and state legislatures don’t force your hand first!), giving your business the opportunity to adjust and budget accordingly rather than suddenly facing potentially significant jumps dictated by legislation.
Another plus recognized by businesses is that raising the minimum wage puts more cash in employees’ pockets, allowing those individuals to then increase their discretionary spending. This domino effect positively impacts businesses by increasing sales of products and services that were not previously affordable for the minimum wage earner.
From a workforce development perspective, raising the minimum wage can amount to a triple play for your organization. Raising wages often increases workforce morale, which can boost productivity and, in turn, boost your bottom line. Higher wages will also increase your company’s chances when competing for talent. The retail industry, for example, sees the labor pool for minimum wage-paying jobs shrinking, and national retailers such as WalMart, TJ Maxx, and Target have responded by raising their minimum wage to enhance recruitment efforts in competing for applicants. Finally, staying competitive with wages can enhance your retention of talent, eliminating the costly need to continuously seek, hire, orient, and train new employees to replace the ones who left for a job with better pay.
While the battle over the federal minimum wage rages on, both public and private employers across the nation have recognized the realities of the labor market and the tangible value of voluntarily raising the minimum wage paid to employees. There are various ways your organization can orchestrate such changes to achieve new heights of quality and productivity along with recruitment and retention success, all positively impacting your organization’s performance. Contact us with questions or for guidance, and we would be happy to work with you on your organizational development goals.