Category Archives: minimum wage

Minimum Wage: New Year, New Pay

The tax reform that will impact every U.S. socio-economic class, for better or worse, isn’t the only change in finances many Americans will see. In the new year, minimum-wage workers in 18 states and 19 cities will see a pay increase; approved wages will eventually range from $12 to $15 an hour. This is a major increase from the current national average, an unlivable $7.25 an hour. (Minimum wage referenced here is for non-tipped workers.)minimum wage increase

Minimum wage was established as part of the Fair Labor Standards Act in 1938 and kept pace with cost of living until about 1968.

“The peak value of the minimum wage in real terms was reached in 1968. To equal the purchasing power of the minimum wage in 1968 ($10.69), the current minimum wage’s real value ($7.25) would have to increase by $3.44 (or 47 percent),” says Craig K. Elwell, specialist in macroeconomic policy at the Congressional Research Service in Washington. “Although the nominal value of the minimum wage was increased by $5.65 (from $1.60 to $7.25) between 1968 and 2009, these legislated adjustments did not enable the minimum wage to keep pace with the increase in consumer prices, so the real minimum wage fell.”

Though numerous states have approved an increase in minimum wage, the full impact will happen gradually. For example, Arizona has approved state minimum wage at $12 an hour, but the 2018 minimum wage will be $10.50, a 0.50 cent increase from last year. In 2019, the amount will increase to $11 and in 2020 it will reach $12 an hour. Starting in 2021, minimum wage in Arizona will increase every year based on cost-of-living calculations.

According to a report from the National Employment Law Project, after full implementation of minimum wage increases in 18 states and 19 cities, approximately 13,101,000 workers will be impacted.

This is a great step toward financial independence for millions of minimum-wage workers, notes Carey Nadeau, founder and CEO of Open Data Nation Inc., in Washington, D.C., and Amy K. Glasmeier, professor of economic geography and regional planning at the Massachusetts Institute of Technology in Boston.

“The minimum wage does not provide a living wage for most American families,” they said. “A typical family of four (two working adults, two children) needs to work nearly two full-time minimum-wage jobs each (a 77-hour work week per working adult) to earn a living wage. A single parent with two children needs to work the equivalent of three and one half full-time jobs (139 hours per work week), more hours than there are in five days, to earn the living wage on a minimum wage income.”

These statistics help paint the bleak landscape of financial struggle minimum-wage workers face, so why not raise wages? Opponents feel that a substantial pay increase will negatively impact job growth.

Those challenging pay raises say that higher wages may mean fewer jobs, particularly those categorized as entry-level. Michael Saltsman, research fellow at the Employment Policies Institute in Washington, says that a wage hike may make automation more attractive to businesses looking to cut or control costs.

“Automation saves you money because it reduces the need for companies to pay people to serve you, but it also decreases the number of jobs to go around. And, over time, business owners have seen that consumers will trade lower prices for less service, putting more jobs at risk as employment costs escalate beyond productivity levels,” said Saltsman.

The doomsday ideologies of naysayers appear to pale in comparison to recent literature reviews and evidence-based research. A great majority of the literature shows little to no negative correlation between wage increases and business outcomes.

As research continues, especially now that many states are enacting their own minimum-wage policies, it will be interesting to see who comes out on top — businesses, workers or both. In the meantime, HR leaders should keep an eye on state policies and cost-of-living estimates, to ensure equity across the continuum of business.

GOP Platform: An HR Cheat Sheet

ThinkstockPhotos-504283950The Republican Party platform approved on Monday hasn’t exactly drawn much attention, what with all the other interesting things happening at the GOP convention in Cleveland. But a look at HR-related provisions in the document gives us a window into how the party is evolving.

Some provisions are largely the same as in the party’s 2012 document. Both platforms, for example, call for portability in health plans and pensions.

But others have changed. Some reflect changing economic conditions. Others reflect changing politics — in particular, the rise of nominee Donald Trump, whose positions don’t always align with the party’s traditional views.

Here’s a quick rundown of policy positions of interest to HR leaders.

International trade: The 2016 platform repeats a 2012 pledge to pursue “a worldwide multilateral agreement among nations committed to the principles of open markets.”

“We need better negotiated trade agreements that put America first. When trade agreements have been carefully negotiated with friendly democracies, they have resulted in millions of new jobs here at home supported by our exports. “

Trans-Pacific Partnership: Reflecting nominee Donald Trump’s opposition, however, the platform does not explicitly mention the proposed trade deal, which the party supported in 2012. It only hints at a go-slow approach.

“[The] American people demand transparency, full disclosure, protection of our national sovereignty, and tough negotiation on the part of those who are supposed to advance the interests of U.S. workers. Significant trade agreements should not be rushed or undertaken in a Lame Duck Congress. “

Workforce development:  With unemployment rates down from four years ago, the 2016 platform drops a proposal backed by 2012 nominee Mitt Romney to replace dozens of retraining programs with state block grants. It does keep language suggesting a greater role for private worker training, however.

“We need new systems of learning to compete with traditional four-year schools: Technical institutions, online universities, life-long learning, and work-based learning in the private sector … a four-year degree from a brick-and-mortar institution is not the only path toward a prosperous and fulfilling career. “

Regulatory activism: The 2016 platform adds language criticizing the Obama administration’s activist approach to labor issues on the regulatory front.

“They are wielding provisions of the Fair Labor Standards Act from the 1930s, designed to fit a manufacturing workplace, to deny flexibility to both employers and employees.”

Targeting NLRB: In particular, the 2016 platform steps up criticism of the National Labor Relations Board. Among policies targeted is the board’s support  of project labor agreements, which guarantee union wages. The platform also calls for repealing the Davis-Bacon Act, which has a similar effect on federal projects.

“Their patronizing and controlling approach leaves workers in a form of peonage to the NLRB. We intend to restore fairness and common sense to that agency. “

Labor unions: This year’s platform reiterates language from 2012 that supports laws allowing workers to opt out of union membership or dues requirements, even if they are covered by a collective-bargaining agreement.

“We support the right of states to enact Right-to-Work laws and call for a national law to protect the economic liberty of the modern workforce.”

Minimum wage: Reflecting new potency of the issue, the 2016 platform add language — albeit briefly — opposing any change in the federal minimum wage.

“Minimum wage is an issue that should be handled at the state and local level.”

Oregon’s ‘Historic’ Minimum-Wage Increase

In the ongoing saga of state-enacted minimum-wage increases in the United States (here are our HREOnline analyses and our HRE Daily posts on the subject), it seems we’ve reached a new plateau.

A gavel and a name plate with the engraving Minimum WageAccording to this release from Littler, Oregon Gov. Kate Brown recently signed the first geographically-tiered minimum-wage hike in the country. Her Senate Bill 1532 also gives Oregon the nation’s current highest political statewide minimum wage.

Basically, the state’s current minimum wage is $9.25; however, beginning July 1, 2016, it will rise steadily each year through at least June 30, 2023. How much the rate will increase will depend on where an employer is located within the state.

In other words, this approach allowed the drafter of the plan to account for a higher cost of living in the Portland metro area, for instance, and a lower cost of living in rural parts of the state.

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Here is the actual table, with some explanation and footnotes showing the rundown of the plan:

Effective Date of Rate Increase Base Rate Exception:  Rate within Portland’s Urban Growth Boundary2 Exception:  Rate within Nonurban Counties3
July 1, 2016 $9.75 $9.75 $9.50
July 1, 2017 $10.25 $11.25 $10.00
July 1, 2018 $10.75 $12.00 $10.50
July 1, 2019 $11.25 $12.50 $11.00
July 1, 2020 $12.00 $13.25 $11.50
July 1, 2021 $12.75 $14.00 $12.00
July 1, 2022 $13.50 $14.75 $12.50

After June 30, 2023, the base rate will be adjusted for inflation, with the Portland rate set $1.25 above the base and the nonurban county rate set $1.00 below the base.

Employers should review their payroll practices and, as with any minimum wage increase, implement any required changes to comply with each of the upcoming rate adjustments starting later this year.

1 Some cities have recently raised the minimum wage higher than the projected rates established by Oregon’s new law.

2 An area encompassing the City of Portland and much of the greater tri-county area (Multnomah, Washington, and Clackamas counties) that is managed and periodically expanded by Metro, the Portland area regional government.

3 Baker, Coos, Crook, Curry, Douglas, Gilliam, Grant, Harney, Jefferson, Klamath, Lake, Malheur, Morrow, Sherman, Umatilla, Union, Wallowa, and Wheeler counties.

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Interestingly, this piece by Kristen Hannum of the Catholic News Service suggests certain lawmakers relied on their religious faith to inform their votes. As Democratic state Rep. Rob Nosse, of Portland, told the Catholic Sentinel, the archdiocesan newspaper, “Absolutely my faith informs how I voted on this and how I think about it.”

Other religious groups in the state apparently don’t even think the new wage does enough. Jeanne Haster, executive director of the Jesuit Volunteer Corps Northwest, thought the legislation could have gone further, but she appreciates the compromises made to pass the bill. “It’s a practical approach,” she tells Hannum.

One she doesn’t even follow.

According to the story, Haster says her Jesuit Volunteer Corps Northwest sets its employees’ salaries according to Portland’s estimated living wage, which was pegged at $13.56 an hour in the summer of 2015. As she suggests, the Portland, Ore., poverty problem that Oregon legislators were at least willing to consider and act on, is huge:

“We try to pay a living wage rather than a minimum wage because Portland has become such a difficult city to afford to live in. I don’t know how people who make minimum wage live. I think we need to be paying people so they can escape living in poverty.”

It’ll be interesting to see if other states follow Oregon’s lead in trying to address this problem regionally and geographically. That would certainly turn this “plateau” into a whole new chapter.