New Minimum Wage Laws to Put Pressure on Many Employers as Labor Markets Tighten
by King White, on May 24, 2017 10:43:24 AM
Employers could be entering a perfect storm as the unemployment rate hits historic lows, the economy continues its growth projectory and new minimum wage laws take effect in certain states across the United States. Employers are already feeling the pain of labor conditions across the country so the minimum wage increases may be just too much for many employers in certain states. To help you plan for the storm, Site Selection Group recently released an updated whitepaper entitled The Impact of Minimum Wage Laws of Corporate Location Decisions 2017. In addition, this blog will provide you a state-by-state status update on minimum wages to help you plan for your next location decision.
Certain employers are at greater risk than others
Minimum wage increases don’t impact all employers. The ones at greatest risk are lower wage operations such as call centers, distribution centers, manufacturing plants and retailers. These types of operations typically rely on low wage earners to staff their operations. For example, white collar operations such as call centers pay entry level wages of $10 to $12 per hour while blue collar operations such as manufacturing plants and distribution centers will pay $12 to $14 per hour for unskilled labor. An even more extreme example is retailers who are typically paying $8 to $10. These employers are going to be faced with some very hard decisions as their labor costs will likely increase significantly by an estimated 10% to 40% to attract the same level and quality applicant pool in states where the minimum wage increases.
Be aware of the impact of city-level minimum wages
It is also important to remember that minimum wages are not necessarily a statewide issue. Many cities across the United States are also increasing their minimum wages. Some examples include Chicago, New York, Santa Fe, New Mexico; and Seattle. City wage increases will not only impact the municipality but also the surrounding suburban cities. A good example is a recent client who engaged us to relocate their call center out of Chicago. The client decided they could relocate across the state border to Indiana to avoid the wage increases implemented by Chicago. This was far enough from Chicago to keep their management team but allowed them to tap into a new labor shed for their hourly workers.
States with the greatest increases
To help you prepare for the upcoming wage increases, Site Selection Group prepared the below table to update you on the current minimum and highest future minimum wage by state. Most of these wage increases will occur over the next three to five years.
California will be impacted the most with minimum wages jumping to $15 per hour by 2022. As one of the most populated states, California will have the greatest amount of jobs at risk in a state that has been heavily targeted for relocations. A detailed analysis of the potential impact is discussed in our blog entitled Over Half a Million Manufacturing, Distribution and Call Center Jobs are at Risk Due to California’s Minimum Wage Increase.
Maine, Oregon, Colorado, New York, Washington, Arizona and District of Columbia are seven other regions where the minimum wage is scheduled to rise. This should be taken into careful consideration by companies considering expansions or relocations, including those who are already located in these states. Site selection strategies are rapidly changing as a result of these legislative changes and the implications are just beginning.
This leads to the question: Which states will see the most dramatic increases? The following list identifies all states (inclusive of the District of Columbia) to help you develop a long-term site selection strategy:
Future Minimum Wage Increases by State
Ranked by % Wage Increase
|Wage Increase||% Wage
|Oregon2 (Portland Metro)||$11.25||$14.75||$3.50||31.11%|
|District of Columbia||$11.50||$15.00||$3.50||30.43%|
|Alabama||None / $7.25||None / $7.25||N/A||N/A|
|Louisiana||None / $7.25||None / $7.25 Fed||N/A||N/A|
|Mississippi||None / $7.25||None / $7.25 Fed||N/A||N/A|
|South Carolina||None / $7.25||None / $7.25 Fed||N/A||N/A|
|Tennessee||None / $7.25||None / $7.25 Fed||N/A||N/A|
1. Current Minimum Wage Rate is based on the minimum wages effective July 1, 2017.
2. Oregon has minimum wage increases based on three areas of the state: Non-Urban Counties; Standard; Portland Metro.
3. Analysis does not reflect individual cities minimum wages which may be higher than their respective states (i.e. Seattle, Chicago, New York Metro, Santa Fe, etc.).
Many experts argue that the demand for labor by employers should drive wage increases, hence the federal minimum wage has remained low for so many years in the majority of the United States. Even though this free market concept has prevailed in the past, many states and cities have taken matters into their own hands by increasing their minimum wages. The long-term impact of these decisions are yet to be seen. As a result, it has never been more critical to carefully evaluate the current and future minimum wage conditions during the site selection process to ensure you make the optimal location decisions.