How Will The Rising Minimum Wage Affect Your Medium Wage Employees?

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We’ve said it before and we’ll say it again: Minimum wage is on the rise. Several states, including Illinois, Arizona, and California, are on track to see a major increase within the next three years — and more are sure to follow suit.

The rise is good news for the thousands of low wage workers across the country who are currently struggling to make a living. Studies show that minimum wage alone isn’t enough to afford a one-bedroom apartment in any state in the country — nonetheless food, clothing, or additional bills and expenses.

Giving these minimum wage workers a boost to their paychecks will certainly boost their spirits … but what about those employees who make just slightly more?

Business owners might be tempted to keep their medium wage employees at the same pay-grade post-increase. After all, our research has found that increasing employees wages could prevent business owners from hiring the additional help they need — and 14 percent admit that an increased minimum wage could actually force them to downsize their teams.

But experts agree that failing to give these employees a pay raise along with their minimum wage counterparts could cause a huge dip in morale.

Those medium wage employees have likely put in more time at your company or they might have more experience in the field — both of which, many would argue, qualify them for higher pay.

Donny C. Shimamoto, CPA at IntrapriseTechKnowledgies LLC, says business owners need to consider the upward impact a wage increase would have, “so they don’t inadvertently cause morale issues regarding employees’ perceptions of wage inequalities.”

“For example,” he says, “if the minimum wage is currently $8 per hour and it increases to $10 per hour, but you have employees who were already getting paid $10 or $12 or even $16 per hour, do they also need increases?”

If you want to maintain good employee morale, the answer is yes.

“The $10-per-hour person will definitely expect an increase,” says Shimamoto. “They were either hired above the minimum or earned raises to get there … but would be back at minimum wage following the change.

“Meanwhile, the $12-per-hour person was previously making 50 percent more than the original minimum wage, so they would likely expect even more of an increase than their $10-per-hour co-workers. To keep this employee at the same pay-grade, they would need to be paid $15 per hour (rather than just matching the $2 increase, which would only take them to $14 per hour).”

Unfortunately, Shimamoto says there’s no right answer to the question. “Different business owners may choose to handle the rolling impact of the increase in different ways, depending on their compensation strategies,” he explains.

No matter what, when considering wage raises, it’s important to keep in mind the true cost of employee unhappiness — it’s far more spendy than most of us would like to think. In fact, unhappy employees cost U.S. business owners up to $550 billion each year in lost productivity, turnover, and replacement costs.

When you put it that way, a little raise doesn’t sound so bad, does it?

 

How do you think the rising minimum wage will effect your employee morale?
Let us know in the comments below! 

 

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