What is your game plan for increasing minimum wages? Get tips here.
Around the nation, large corporations are taking the minimum wage issue to heart by instituting salary increases for their most underpaid workers.
Companies like McDonald’s, Wal-Mart, Target, and TJX, the parent company of TJ Maxx and Marshalls, have announced plans to raise wages by as much as $1 or more per hour, with more raises coming for the beginning of 2016. This is good news for the millions of entry-level and minimum wage workers who typically earn just above the poverty line in many U.S. states.
Are people for or against an increase in the federal minimum wage?
Based on PayScale data, users are split equally when it comes to raising minimum wage:
- 49.4 percent are for a raise in the federal minimum wage.
- 50.6 percent are against a raise in the minimum wage.
If the minimum wage is being increased, why aren’t more companies looking at wages for the rest of their workforce who have not seen raises in the last few years since the recession? How could this trend affect salary increases across the board?
Talking about the minimum wage debate
I sat down with PayScale’s Director of Professional Services, Mykkah Herner, to talk about this issue. Raising minimum wages goes a lot deeper than just managing entry-level employee wages. Mykkah sees several challenges of managing minimum wage increases, including the “Four Cs” of compensation.
Complexity – Timelines for business compliance vary widely, even in states that have already approved minimum wages increases. Some businesses are in cities like Seattle and San Francisco where the city-wide minimum wage supersedes the states and do not meet the requirements of the increases. Add to this the Affordable Care Act requirements, and managing the minimum wage in the proposed tier increases becomes a lot more difficult.
Compression – Simply raising wages of entry-level employees isn’t going to be enough. Employers must also look at mid- to high-level jobs to see how those wages need to move. In the past, a 2 to 5 percent increase in wages seemed fair, but what happens when a company must start paying its workers who previously earned $9 an hour $15 per hour? How is this fair to the employees who’ve worked at the company for years at the lower rate? Such employees could see this as a threat to their value in the company – the “isn’t MY job important”? scenario.
Budgets – How will businesses compete for the best talent in states that don’t have to comply yet or where the minimum wage has not increased, as compared to more aggressive regions where employers are forced to pay more? Mykkah says that “It’s a matter of getting creative with pay grade structures to accommodate both the need to pay fairly and legally as well as to differentiate jobs that are now getting paid more and more similarly.” If an employer hopes to maintain a top workforce, the focus needs to be on compensating top performers, not minimum wagers.
Communication – This is a tough one. Employees who have been typically paid lower rates (and not ALL people who earn minimum wage fit a certain demographic) are apt to be happy about this change, but others who haven’t seen a real raise in years are going to react negatively. Mykkah recommends “organizations focus on aligning the right employees with the right jobs” and to “Think about the impact on all jobs not just minimum wage jobs and compliance. What are your priorities and what people and what jobs matter the most to your organizational success?”
Best practices for dealing with minimum wage increases
Here are three last pointers as you work through minimum wage increases at your organization:
- Learn the laws. The most important thing to do as an employer is to stay up to date on the law as the minimum wage increases roll out.
- Focus on pay equity. The purpose of raising the minimum wage is to reduce poverty and help people thrive in a restored economy. Even if your business is not directly affected, you can take steps now to increase pay equity among your workers.
- Look at the positives. While the increase in pay for certain entry-level jobs will increase, others may not experience such a dramatic change. And while the changes are bound to contribute to labor shifts, try to look at this as “good turnover” because your organization will reduce dead weight, enabling it to hire new and better people.
Companies can stay ahead of the updates to minimum wage laws and fair salary management by taking part in our Minimum Wage Debate at PayScale. We’d like to hear from you!
This is NOT a good thing. Reduce poverty level, increase more people in the raised poverty level. Who are the people making these decisions…the ones who make alot more and won’t be affected. Please get real! EX: Someone who has taken 3 years to get raises up to the NEW minimum wage, and now makes the same as a new hire????? Where is the fairness in this. People please get real!!!!!!!
i make one dollar above minimum wage. if minimum wage is raised by one dollar then should my wage increase by one dollar?
Here is my issue with this “living wage” of $15.00 an hour. Many people that are making minimum wage or slightly above are also getting government benfits in one way or another. Maybe it’s reduced lunch for their children at school, maybe it’s food stamps or reduced childcare. So now all of a sudden your pay goes up and you no longer qualify for these benefits. There isn’t an “ease you out of” for these programs so that money is not going to get these workers anything. The raise in pay will just equal out their other benefits and it… Read more »
I own 3 small retail stores. If the minimum wage is increased. I will have too increase my retail prices.
I believe this is like being between a rock and a hard place.
I need someone to actually explain to me how raising the minimum wage is going to reduce poverty and help people thrive when every time the minimum wage goes up the cost of living goes up Plus the fact that good solid employees that have been working for a company are not getting the performance increases they deserve because everyone is having to pay more for less experienced new employees, so while the cost of living goes up due to the increase in minimum wages, those that are making more than minimum wage have less to spend because retail prices… Read more »
Pay compression is a very difficult subject for everyone to not only understand, but to also apply. If the bottom is lifted, those just above it need an adjustment, as well. Then, the ripple continues, which begs the question of how much is TOO MUCH to pay for a position? This has been a very challenging concept to explain and it is difficult, particularly for entry level pay people. However, the cost of living is NOT stopping, regardless of who has gotten a minimum pay increase. So, face ALL of reality, not just the part that frustrates for the moment.
Typical neoliberal talking points out in force look silly in the historical context. i.e. A raise in the minimum wage would destroy the economy just like it did when we raised it on: October 1938 (FDR): $0.25/hr ($4.15/hr in 2014 dollars) October 1939 (FDR): $0.30/hr ($5.05/hr) October 1945 (Truman): $0.40/hr ($5.20/hr) January 1950 (Truman): $0.75/hr ($7.29/hr) March 1956 (Eisenhower): $1/hr ($8.61/hr) September 1961 (Kennedy): $1.16/hr ($8.97/hr) September 1963 (Kennedy): $1.25/hr ($9.56/hr) February 1967 (Johnson): $1.40/hr ($9.80/hr) February 1968 (Johnson): $1.60/hr ($10.75/hr) May 1974 (Nixon): $2/hr ($9.49/hr) January 1975 (Ford): $2.10/hr ($9.13/hr) January 1976 (Ford): $2.30/hr ($9.47/hr) January 1978 (Carter): $2.65… Read more »
I’m totally against raising the minimum wage. Here in California, companies are already packing up and leaving. My position as a supervisor means nothing now, as I’m now paid the exact amount as a part timer or entry level associate. They do not understand that the minimum wage is a great idea in theory…but looking at what its causing…. not worth it. My company is letting go of 1 manager per store in California, and several other stores are firing non essential staff now. Unemployment is on the rise, and with minimum wage increasing, it’ll be higher before christmas. The… Read more »
I think the person who gained a skill set over the years to be earning, say.. $20/hour or twice the current minimum wage is the one he will be most upset about this. Companies MUST – by law – increase the minimum wage but they don’t have to increase other wages over the minimum. So Joe $20/hour has a few choices: 1) Continually ask for a raise which is always awkward and never guaranteed 2) Realize a sense of equity must be made and adjust for it (i.e. do less work or not strive to do more) and finally 3)… Read more »
The problem is the middle income class has had their wages stagnating for years. The low income class has their income subsidized with the tax money from the middle class. While CEOs sometimes make 300 x the average salaried individual in their organization – not the janiotor, the average employer. The rich need to pay more taxes and the tax structure for businesses needs to be more competitive in the US compared to othet countries so companies will stop trying to not pay taxes and sheltering their money. If you earn $300 million in one year, why shouldn’t you be… Read more »
I appreciate your assistance.
Great article! Just because Mr. Obama has decided the minimum wage must increase it obviously should be done in the name of politics, right? There is no fairness in that. The cost of living will keep increasing and those minimum wage employees will, in the end, see no advantage but to spend more for the products they need and pay more in taxes.
This may be of interest.
http://www.economist.com/news/briefing/21650086-salaries-rich-countries-are-stagnating-even-growth-returns-and-politicians-are-paying
Thank you all for your great comments, suggestions, and concerns. I agree wholeheartedly that raising the minimum wage is not the ultimate solution, but that it’s a sign that things need to change in terms of fair wages for many hard working people. It will be difficult for businesses of all sizes, but in the long run I believe it will help to support a better economy because it encourages consumerism (when people have access to extra funds). Using PayScale salary surveys and tools help employers to pay living wages based on actual job types and real-time data.
in the state of California minimum wage will increase $10 an hour does the employer have to pay salaried employees double the amount of minimum wage
I’m a catering supervisor just had my rise at 1per cent.with the minimum wage for catering assistant I’m on 28p more an hour
I have the same issue as Ken from 07 Dec. This is something I fear. As I am a temporary employee. But changed position which gave me a $1 raise. I wouldn’t feel comfortable with my position if entry level employees are getting almost as much as I.
it wont make a difference in a year because as prices go up minimum wage stays the same and we will be back at where we were before increase within a year or two and if nothing is done to compinsate earners already earning above minimum wage we will slowly undermine the goal here because there is no caps on anything we buy or need no laws that say or have limits to what they can charge this is the problem
The minimum wage going up will devastate this country. It will raise prices because of increased demand for goods. Now people who had buying power will have less, much less, buying power. This pushes prices even higher. People stop buying. When people stop buying, businesses stop ordering goods. When no goods are ordered manufacturing is cut back. That means job losses across the board. With the job losses we get deeper in debt as a country. The great depression has nothing on what the increase in minimum wage will do to this country in the weeks, months, and years following… Read more »
For ease of computation, let’s set the current minimum wage at 8/hr for this comment. This is my take on the minimum wage increase. The raise would be a $7 increase to the minimum. This would be a substantial impact on company payroll as it is without having to reward workers already making more than the minimum. That being said, I am pretty sure that any raise given to that worker would not equal the $7 jump to the minimum. The man that’s worked hard all his life to achieve the $18/hr he currently makes gets the shaft. Let’s say… Read more »
If you want to fix the economy basic rule don’t spend you money in one place lot of you have heard that saying before. Spread Your Money Out. why you ask because it balances everthang out. For example Bob’s grocery store is a small business walmart is a big business how many people in your community go to Walmart instead of going to Bob’s grocery store. 75% go to Walmart 25% go to Bob’s grocery store so you feed the big companies money like walmart instead helping your community small grocery store so if you have $300 to spend 100… Read more »
If you want to fix the economy basic rule don’t spend you money in one place lot of you have heard that saying before. Spread Your Money Out. why you ask because it balances everthang out. For example Bob’s grocery store is a small business walmart is a big business how many people in your community go to Walmart instead of going to Bob’s grocery store. 75% go to Walmart 25% go to Bob’s grocery store so you feed the big companies money like walmart instead helping your community small grocery store so if you have $300 to spend 100… Read more »
If wages go up, companies need to find a way to pay that extra money. It has to come from someplace. So prices go up. It’s a simple as that. And when prices go up, people stop, or slow their buying. If I pay 10 people $9 /hr I spend $90. Now if wages go up to $10 , I spend $100. I need to get that $10 somehow. Or I just pay 9 people $10 and I loose 1 person, but my ex pence us the same. So it raise prices, or lower quality. Simple math. Also. If I’m… Read more »
can my employer credit my merit increase just to pay the minimum wage
i am a assistant manager been with a company for five years i started at $8 a hr. worrked my way up to 12 hr then minimum wage went to 10 hr my pay did not go up, i feel cheated and thinking of steping down to cashere, why did i not get a raise
It’s simple economics people. When people have higher wages they have more money to spend therefore increasing these companies revenue that will cover the cost of that extra pay.