Minimum Wage Hike

The Democratic-controlled House of Representatives has introduced the Raise the Wage Act, which would, by 2020, increase the federal minimum wage to $15 an hour, up from the current $7.25 hourly rate.  State laws would then have to match or exceed that new minimum. Most states (30 total including the District of Columbia) currently exceed the federal minimum of $7.25/hr., but not beyond $13.25/hr. , with most falling between $8.25 and $11.00.

This is the longest period of time between increases in the national minimum wage since the Great Depression; the last change in the federal minimum wage (taking it to $7.25/hr.)  went into effect in July 2009, ten years ago. Adjusted for inflation, the minimum wage is lower than it was 50 years ago (it was $1.30/hr. in 1969).

McDonald’s — a major target of the Fight for $15 movement — recently announced it would no longer support efforts to fight an increase. Even the CEO of Walmart says the minimum wage should be raised, but not as dramatically as the Democratic bill proposes.

The current administration has indicated that it should be left to the states to determine the minimum wage, rather than imposing a national minimum.  This actually makes some sense, if you consider the wide variation of pay rates that exist by geographical area; pay rates on the northeast and west coasts and in certain major metropolitan areas (Chicago, Washington DC, Philadelphia, etc.) vary greatly from the rates in many other areas of the U.S.. A minimum wage rate in California is higher than it needs to be for workers in Texas, Tennessee or Kentucky, where the cost of living is lower on average (lower housing cost, taxes, food costs, etc.).

Pay rates are typically driven by supply and demand; supply of qualified talent and the demand for that talent. Minimum wage rates have been increasing in recent years due to the short supply of labor for entry-level jobs in retail and service industries, regardless of the lack of change in the federal minimum wage rate.

It is not likely that the Raise the Wage Act will be passed into law, at least in its current form.  It will probably remain up to the individual states to deal with this issue as most have already been doing.

Minimum Wage in Northeast Ohio

As reported in the Plain Dealer June 29, 2019 edition, the health care providers in this region, including Cleveland Clinic. University Hospitals, MetroHealth and Neighborhood Family Practice are all raising the minimum wage rate for their employees to $15/hr. as of 2020. That includes jobs in maintenance and environmental, food services and patient transport. On a full-time schedule (40 hrs per week) that comes to $31,200/yr.

Health care leads the pack in pay rates for lower-tier jobs. There has consistently been a shortage of skilled healthcare workers which has kept upward pressure on pay rates for those jobs.  This increase in the minimum wage rate will undoubtedly result in higher rates for skilled jobs as well.

What is not clear is how this will impact minimum pay rates in other sectors, such as manufacturing, retail and service jobs. As reported by the U.S. Bureau of Labor Statistics, only 33% of non-healthcare jobs pay more than $15 per hour, compared to 82% of healthcare jobs.

A factor that will probably result in pay rate increases for all sectors is the anticipated change in the threshold for exempt status under the Fair Labor Standards Act (FLSA). On March 7, 2019, the United States Department of Labor (USDOL) issued a proposed rule that would increase the minimum salary threshold to qualify for exemption from the overtime provisions of the Fair Labor Standards Act (FLSA) to $679 per week ($35,308 annually). Employers will be required to pay their employees at least $35,308 per year to treat them as exempt, regardless of their job duties.

Published by Dave the HR Compliance Guy

Human Resource and legal professional specializing in HR compliance advisory services

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