New minimum wage laws are going to affect how companies hire, experts say. Just how much is to-be-determined. But changes in the way companies hire, if they haven’t already come, are already taking place.
John Johnston, Director of Manufacturing for States Manufacturing Corporation in Minneapolis, provided both professional and personal insight to the new minimum wage laws.
How will the new minimum wage laws will affect hiring at his company? Johnston explained:
“Since we do not use minimum wage as a hiring tool and only for part-time, low-skill jobs (summer help), we are now less likely to hire someone with little or no experience since we are paying a higher wage or not even hiring them and just find another company that would do the job. We pay a living wage at entry with progressions. If the bottom starts higher, we would most likely have more part-time workers versus full-time to save the cost of benefits and the higher wages.”
With a higher minimum wage, prices will go higher and that will make it back to all consumers, Johnston points out. “I look at what is happening with fast food workers in New York and they will lose their jobs to a computer because of costs,” says Johnston.
In his opinion, Johnston says, minimum wage was for temporary workers without the ability to move to full-time. “It filled a niche and now it will be harder on consumers because they will bear the burden of the wage, the employer will pass on as much as they can and eat the rest – if they can afford to,” says Johnston.
He then pointed out how his son just got his first job – which pays minimum wage – and was thrilled to get hired and get experience.
“He would love more money, but to me, the employer is taking a chance giving him his first job,” says Johnston. “He is learning basic job skills and is not yet deserving – or needing – a higher wage since he is living at home and we cover all of his basic needs.”
Bill Ashton, owner of Jerseys Bar and Grill in Inver Grove Heights, Minnesota, pointed out that many small business owners are paying higher than minimum wage already, including fast food chains.
“Now when a small business owner is hiring, it makes them look cheap if they are paying $9.50 or $10 per hour,” says Ashton.
How does this come back to affect the consumer when minimum wages are higher like this?
“Prices will go up for the consumer, pricing some out of the market,” says Ashton.
How does it affect business and hiring in general – do you have to hire less?
“I think some businesses will hire less, but expect more from the people they hire,” says Ashton.
Ashton elaborates on concerns and issues from the restaurant and hospitality industry, related to how it affects businesses like his in Minnesota.
“The new minimum wage hike should have had a tip credit like the majority of other states have,” say Ashton. “It was proposed, that for restaurants, bars and tipped employees, minimum wage would stay the same, but, the tipped employee would have to make at least $12 an hour between tips and wages. If they didn’t meet the $12 an hour, the employer would kick in the difference. The servers union was against this, as the majority of minimum wage workers are tipped employees. The servers union is not very big in Minnesota like it is in tourist towns.”
Because minimum wage goes up for tipped employees, the back of the house staff (cooks/dishwashers) and cleaning staff suffer, Ashton points out. Instead of restaurants paying cooks $12-$15 an hour, they have to scale back those wages to boost the wages of servers and bartenders that already make $15-$40 an hour depending on where they work.
“It is not fare for these workers,” says Ashton. “Minnesota needs to add a tip credit at some point, or we will lose a lot of independent restaurants that can’t afford payroll.”
An article titled The Negative Effects of Minimum wage laws – on downsizinggovernment.org, stated that aside from changes in employment, empirical studies have documented other methods by which businesses and markets adjust to minimum wage increases. The congressional Joint Economic Committee published a major review of 50 years of academic research on the minimum wage in 1995.33 The study found a wide range of direct and indirect effects of increased minimum wages that may occur, including:
- Increasing the likelihood and duration of unemployment for low-wage workers, particularly during economic downturns;
- Encouraging employers to cut worker training;
- Increasing job turnover;
- Discouraging part-time work and reducing school attendance;
- Driving workers into uncovered jobs, thus reducing wages in those sectors;
- Encouraging employers to cut back on fringe benefits;
- Encouraging employers to install labor-saving devices;
- Increasing inflationary pressure;
- Increasing teenage crime rates as a result of higher unemployment; and
- Encouraging employers to hire illegal aliens.
Meanwhile, the United States Department of Labor created a page called Minimum Wage Mythbusters -, which answers some questions to some of the hotly debated changes related to the minimum wage increases, such as this one:
Myth: Increasing the minimum wage will cause people to lose their jobs
The response was this:
Not true: A review of 64 studies on minimum wage increases found no discernible effect on employment. Additionally, more than 600 economists, seven of them Nobel Prize winners in economics, have signed onto a letter in support of raising the minimum wage to $10.10 by 2016.
The reality is hiring practices are changing because of new minimum wage laws. How much and how it affects hiring could be an industry-by-industry and business-by-business basis. The short and long-term effects are hotly debated and bias towards one’s personal or political gain is rampant on the Internet. Employers have to hire to maintain business goals. In an article by Adecco titled Waging a debate – the pros and cons of raising the minimum wage, the Adecco experts concluded with this:
“One thing that people on both sides of the debate can agree on is that employers will seek to maximize the productivity of every employee in order to get the maximum return on salaries. That’s what makes it so important for businesses to hire qualified, skilled professionals who can get the job done as efficiently and effectively as possible.”
How are the new minimum wage laws affecting your hiring?
What Employers Should Do: Recommendations for managing minimum wage increases, from Brian Dixon is an attorney with Littler Mendelson in San Francisco in an SHRM article titled The Future of Minimum Wage – 2015 and Beyond:
- Have an effective system of monitoring minimum wage increases at all levels.
- Ensure non-exempt employees—tipped and non-tipped—are paid at least the minimum wage. If operating in a state that has a 7(i) exemption or an exempt employee salary basis component that uses the state minimum wage, ensure wage requirements are satisfied.
- Make sure that the minimum wage is paid separately for each hour of work in those jurisdictions which require such strict compliance.
- Update minimum wage posters.
- Inform employees about their new rate(s).
- Train HR, payroll, and managerial employees on increases, posting, and notice requirements, and how to respond to employee inquiries concerning wage rate changes.
- If a third-party payroll processor is used, confirm it is aware of changes and has updated systems accordingly.