The Impact of Minimum Wages on Corporate Location Decisions

Minimum wage laws continue to be a hot topic across the U.S. due to the increased cost of living, tight labor conditions, and mounting political pressure. As a result, the minimum wage in many states has increased over the last five years creating challenges for companies trying to control costs at existing locations and plan for new sites. These rising rates have especially impacted labor availability and labor costs for employers paying slightly above minimum wage. Retail, call center, warehouse, and unskilled production workers will be among those most affected by the continued minimum wage increases.

Site Selection Group releases detailed report on minimum wages

To understand the potential impact on your location decisions, Site Selection Group released a detailed report  analyzing current and future minimum wage trends, 2020 Minimum Wage Report. The report provides a detailed summary of the states with the greatest increases in minimum wages and which will potentially create the greatest risk for employers.  Some of the key findings outlined in the report include the following:

• 29 states and Washington D.C. have minimum wages above the federal minimum wage
• 28 states and Washington D.C. have increased minimum wages since 2015
• 22 states haven’t raised the minimum wage since 2015
• 14 states have increased it by less than 20%
• 14 states that currently have a minimum wage equal to the federal minimum wage have not passed legislation to enact future increases
• 14 states have minimum wages the same as the federal minimum wage of $7.25
• 11 states and Washington D.C. will have future increases by 2025
• 11 states and Washington D.C. have passed legislation that will increase minimum wages over the next five years
• 8 states and Washington D.C. have increased their minimum wages between 20%-40%
• 7 states will increase theirs by 20% or greater from 2020 to 2025
• 6 states have increased minimum wages between 40%-60%
• 6 states have seen a percentage increase in the minimum wage of over 40% since 2015
• 6 states and Washington D.C. have minimum wages of $12 or higher
• 5 states will remain without an established state minimum wage
• 5 states do not have an established state minimum wage
• 2 states have minimum wages below the federal minimum wage
• 2 states have and will continue to have future minimum wages below the federal minimum wage
• 1 state had the greatest increase in the minimum wage — 60%

Future increases will pose the greatest risk to employers

With minimum wages trending upward in many states, it is critical to know which states will continue increasing their minimum wages, a phenomenon that can cause further wage inflation. The following map indicates each state’s minimum wage by 2025.   

Future Minimum Wages by 2025

Conclusions

Minimum wage legislation will continue to be a critical factor that companies need to carefully monitor as many factors are influencing their changes. While Site Selection Group’s Minimum Wage Report 2020 primarily focuses on state and federal minimum wages, it is also important to evaluate municipal-level minimum wages as many cities have their own laws and regulations on this matter. Some examples include New York City, which will be at $15 per hour for all employees as of Dec. 31, 2019. San Francisco’s minimum wage increased to $15.59 as of July 1, 2019.  Seattle has also increased its minimum wage, which is correlated to the employee size of the company.  These minimum wage changes are only one factor that companies should consider during the site selection process. Other site selection factors such as labor availability, labor costs, logistics, business climate, real estate, economic incentives, and other conditions that are specific to a company’s industry or operation type may prove to be more critical.