Are
You Ready for the Minimum Wage Backlash?
In
November, Florida voters approved a constitutional amendment
increasing the minimum wage from $5.15 per hour to $6.15
per hour. The increase goes into effect on May 2, 2005.
Many other states have already increased their minimum
wage in 2005 including New York, Washington, District
of Columbia, Maryland and Illinois to name a few. To
most companies, raising the minimum wage is not a big
deal as their lowest paid employees are significantly
above the new minimum wage. Right? Well, maybe not.
The last time the minimum wage increased was September
1, 1997, and many may not remember the backlash it caused
in the workplace. At that time, the increase was only
8% and many employees who were then making quite a bit
more than $5.15 per hour expressed disappointment with
the fact that they did not receive wage increases.
The
upcoming Florida minimum wage increase is nearly 20%
and should have a much more profound trickle-up effect
on wages throughout the state than previous wage increases.
Are you ready? The newspapers will have headline stories
which will be read by your employees who will wonder
if they will be getting more money. After all, there
is some good reasoning. If their job was worth three
dollars an hour more than the minimum wage in April,
isn’t it worth three dollars more than the minimum
wage in May? What’s your answer? Are you ready?
What
if you have a retail store and pride yourself on paying
more than the minimum wage. Now you have two choices,
you can either raise your starting wage for new employees
or change your compensation philosophy. What about the
employee who started at $6.00 an hour last year and
received two raises since then and now makes $6.50 per
hour. Does this person deserve a raise because your
new hires will earn only 35 cents an hour less than
an experienced employee?
What
about the experienced accounting clerk who is making
$10.00 an hour? Does he deserve a wage increase because
you feel you must raise the starting wage for an accounting
clerk from $7.00 to $7.50 an hour because the pay was
too close to the minimum wage?
These
are tough questions to answer.
In
Florida, the trouble will start all over again next
year. The minimum wage amendment includes an annual
escalator to the minimum wage which is tied to the consumer
price index. So, on January 1 of each year, the minimum
wage will go up again.
Aside
from raising all wages to a minimum of $6.15 per hour,
our recommendation is to take a wait and see approach.
Wage rates are normally determined by the marketplace.
In time, the market will tell you what you should do
with your rates of pay. In the meantime, tell your employees
that you pay competitive wages and will continue to
do so regardless of were the minimum wage falls. In
time, conduct a survey of the wages being paid by your
competitors using a third party to conduct the survey.
If a wage increase is warranted and you can afford to
pay higher wages, than do it.
In
Florida, there is very little that can be done as the
minimum wage is now a part of the state constitution.
At least in Maryland and New York, it can be changed
by the legislature. Other states should keep a close
eye on what happens in Florida over the next couple
of years. It could turn out to be a very educational
experience.
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