From the Publisher: The Wage Dilemma

Pros and cons of a $15-hour minimum wage.
Ben Young Publisher Georgia Trend with a tie and jacket and red background

With President Joe Biden’s administration and a Democratic-led Congress, it’s possible the minimum wage could increase to $15 by 2025. This is a mind blower for many business owners in our state.

Georgia is tied with Wyoming for the lowest state minimum wage in the country at $5.15. That doesn’t apply to most jobs, which are legally bound to the federal minimum wage of $7.25. However, healthcare aides, farm workers, seasonal workers and those who receive tips are not required to be paid federal minimum wage. It could be argued that our low minimum wage and right-to-work status have helped to drive our robust state economy.

I’ve always been proud of our Best Place to do Business distinction, but Georgia needs to be the best place to live, too. Can anyone live on a salary of $18,000 a year anymore?

Regardless of one’s opinion on the humanity of the issue, the writing is on the wall. With Florida and other states pushing ahead to a $15-an-hour minimum wage, it becomes an issue of competitiveness, with the real possibility of workers fleeing Georgia to surrounding states with better wages.

While the Congressional Budget Office has estimated that an increase to $15 by 2025 would result in 1.4 million workers losing their jobs, it also found 17 million workers would experience wage increases and 900,000 would be lifted out of poverty. Minimum wage increases typically decrease employee turnover, increase productivity and pump more money into local economies.

A study by the University of California, Berkeley, Labor Center found that families of more than half of workers in Georgia who would receive pay increases with a $15 minimum wage are currently enrolled in public safety-net programs at an annual cost of $4.7 billion. These programs include Medicaid, Children’s Health Insurance Program (CHIP), Temporary Aid for Needy Families (TANF), Earned Income Tax Credit (EITC) and Supplemental Nutrition Assistance Program (SNAP). The family of a McDonald’s restaurant worker, for example, chooses Medicaid because they can’t afford employer-offered insurance on a salary of $9 an hour. Raising the minimum wage would presumably end much of the dependance on safety-net programs.

Under proposals from the U.S. House of Representatives, tipped minimum wage would be lifted from $2.13 to $4.95 an hour in the first year, increasing thereafter to meet the $15. Restaurant workers would be less dependent on tips and less vulnerable to harassment. Wages for disabled workers would also rise. Wages would be raised for 31% of Black workers, 26% of Latino workers, and nearly 60% of workers who would see a raise are women, many of them frontline workers, according to the Economic Policy Institute (EPI).

The EPI also found that more than a third of workers in nursing homes or residential care would see increased pay, as well as 36% of retail workers, 42% of grocery store workers and 64% of servers, cooks and food-prep workers.

On the flip side, some worry that what’s good for employees might be bad for employers, especially small businesses, which generate roughly half of the country’s gross domestic product (GDP). Anticipating layoffs and reduced hiring, some see a trade-off that hurts entry-level workers in order to boost the middle class. Some point to the timing, calling it a death sentence for small businesses that are already suffering because of COVID-19.

According to the Small Business Index issued by the U.S. Chamber of Commerce, half of small businesses currently see their operations continuing for a year or less before having to permanently close; in some cases businesses already hard hit by the pandemic will have to choose between raising wages or reducing staff. Only 27% of businesses plan to increase their number of employees in the next year. Strapped local governments and school districts will also face tough staffing decisions, and larger businesses may move to employ more automation to replace workers.

In other ways, the timing could be beneficial if one considers President Biden’s federal stimulus plan as a means of offsetting costs to businesses potentially impacted by raising the minimum wage. For many workers struggling to make ends meet, it feels like now or never. In the larger context of fighting poverty and inequality, raising the minimum wage is a critical step.

It’s a lot to consider. As states continue to raise wages on their own, these impacts and potential mitigation efforts must be heavily vetted. The pandemic has shown our frontline workers deserve their due. But let’s not kneecap half the country’s economy in the process. Continued thoughtful examination of the pros and cons is needed to determine the most beneficial outcome overall.

Categories: From the Publisher, Opinions