Minimum Wage Laws Are Changing: What Employers Need To Know

Note: This post was published in August of 2015 and may contain outdated information.

Minimum wage – you’re required by law to meet it, and in many industries your ability to surpass it is a sign of success.

Contrary to popular belief, though, it’s not just fast food restaurants that are going to be affected if the minimum wage goes up.

According to the Bureau of Labor Statistics, about 4.3% of the workforce was making minimum wage in 2013. The Pew Research Center, adding on to this data, found that about one-third of all workers were making more than the federal minimum wage of $7.25 but less than the proposed minimum of $10.10 an hour in 2014.

Minimum Wage Across America

California is currently the most progressive state in the nation when it comes to minimum wage laws. San Francisco and Oakland have both passed legislation bringing them well above the national average, and Los Angeles has partly followed suit with a high minimum wage for workers in large hotels.

Outside of California, Seattle, WA is tied with San Francisco for the highest minimum wage at $15 an hour – though both cities are currently in the process of phasing these increases in, and will be continuing to do so for several more years.

Washington, DC has already passed legislation raising the minimum wage within the city to $11.50, and has proposed an initiative for the 2016 elections that would increase it to $15.

Several locations have minimum wages lower than the federal standard, including the states of Georgia and Wyoming – both have minimum wages of $5.15 applicable to businesses in various situations, including many not subject to the Fair Labor Standards Act. Common exemptions include companies that engage in no interstate commerce and make less than $500,000/year.

Five states – Alabama, Louisiana, Mississippi, South Carolina, and Tennessee – only enforce the federal minimum wage as they do not have any local legislation on this topic.

Pros and Cons of Increases in Minimum Wage

Many supporters of increases to the minimum wage believe that a higher wage supports the economy. While well-paid workers tend to save a significant part of their income, low-paid workers have little or no ability to do so – and it’s very likely that most of the money added to their wages would remain within the economy, rather than being removed for investments.

Supporters believe that this increased spending will also increase consumption of goods, leading directly to a higher employment rate. The cost-of-living is also a factor – a full-time minimum wage worker, at the current national level, is making below the poverty line for a family of two, and many supporters believe that full-time work should always be enough to keep a family out of poverty.

Opponents, in contrast, often contend that increases impact the cost of doing business and make it harder for companies to get started, or simply to stay in business. Other see low wages as preferable to no wages, as many low-skilled workers could be priced out of employment, adding to the nation’s unemployment rate.

The Impact of Changes

The biggest impact of changes in laws is likely to be felt by teenagers – as the American Enterprise Institute observed, workers with low skills and little experience tend to experience the most disruption when there’s a significant change in the minimum wage. These individuals are usually pushed into competition with older (and thus more valuable) workers, and in many cases the ripple effect of this can last throughout their lives.

The economy is too complex to fully judge things before they begin – but you should be prepared to adjust your business practices to compensate for the changes you’ll see.