Service Workers Are The Ones to Feel the Impact of the Pay Shift
The arrival of a new year brings a welcome increase in minimum wage for some workers and a potential challenge for some employers.
On Jan. 1, the state’s minimum wage is rising to $10.30 per hour, marking the third consecutive year it has increased by an 85-cent increment.
There had already been a surge of pandemic-related job losses and furloughs in 2020, according to the Congressional Research Service, so although an increase in base pay might come as a relief to some, to others, it might induce fear of further job losses.
The majority of people should not worry, according to University of Missouri chancellor’s professor of economics, Peter Mueser. He said any employment losses due to this year’s minimum wage hike will be minor.
The segment of the economy most affected by potential job losses will consist of low wage workers, such as those in the service industry, he said.
That is the worry for the Burger King franchise manager at 6 Silo Drive in Union.
“This will change things drastically,” Burger King general manager Kaylyn Ashworth said, “just between manager pay, crew pay, overall wages.”
Minimum wage employees only make up about 2 percent of Missouri’s workforce. Those in food preparation and serving-related jobs form about 9 percent.
Hourly workers in Franklin County’s private sector made an average of $20.67 per hour in 2019, which was nearly $4 below the state’s average rate.
“This will affect us getting staff, it will affect the economy, it will affect everything, the increasing pay,” Ashworth said.
Separately from the minimum wage hike, general pay rates have increased “substantially” throughout the past year, according to Mike King, Union franchise owner of Express Employment Professionals. Employers have had to rise pay to retain workers in a competitive labor market, despite the pandemic. King works with job seekers typically making $2 to $7 over minimum wage.
Local Work Ambles On
Mueser predicts most local businesses that already pay employees more than minimum wage will experience no workplace changes as a result of the hike in minimum wage.
Sugarfire Smoke House general manager Luke Miller said the Washington restaurant and its 20 employees will just follow the new state guidelines without any major concerns.
“There won’t really be a change,” he said. “We have a minimum number of people to keep things running, and we’re just going to continue.”
Mosaic Cafe and Catering owner Patrick Long said that “everything will pretty much be status quo.” His six employees, who all already make above minimum wage, will not be impacted by the change.
The Union Burger King employs 17 people, and five to six of them make minimum wage, Ashworth said. She is not sure how she will account for the pay increase, but she is considering laying off one staff member or reducing worker’s shifts.
Job Loss, Higher Pay, but No Fear? Explaining the Contradictions
The minimum wage change has a smaller effect on the overall economy than it would have without the pandemic.
Minimum wage workers have been “suffering from layoffs already” due to COVID-19, Mueser said, so there are fewer workers who will see an impact from the pay increase.
“This moves in supposedly opposite directions: an industry in decline in the coronavirus, and people taking higher wages,” he said. “But it’s a fair substitution if you think about it. Firms have been forced to shut down permanently or temporarily due to the coronavirus, so the number of remaining jobs at risk is smaller.”
Missouri’s minimum wage raise was initiated in 2018 with the passing of Proposition B. By popular vote, the state’s base pay has increased by 85 cents each year and will continue to do so through 2023 when it caps at $12 per hour.
“Because the minimum wage is relatively low compared to the historical level, it doesn’t affect the overall economy as much as it did in the historic past,” Mueser said.
Much more consequential are community-wide, pandemic-related economic decisions, he said. The potential of government-mandated shutdowns will affect workers much more than the 85-cent raise.
“An increase in the minimum wage is small compared to all the other stuff going on within the economy,” he said. “The coronavirus, the vaccine, the release of limitations from the coronavirus, those will drive the economy, but the minimum wage affects a small number of people.”