Rethinking a Minimum-wage Boost
By Christopher Geehern
Three-quarters of Massachusetts employers would face increases in their compensation costs if state lawmakers pass a $15 per hour minimum wage, according to two recent surveys by Associated Industries of Massachusetts (AIM). And those compensation increases would be enough to force some companies to postpone hiring or consider leaving the Commonwealth altogether.
Both the monthly survey question attached to the AIM Business Confidence Index in December and the annual AIM HR Practices Survey, also taken in December, found that 13% of companies employed people at the former $10 per hour state minimum wage, while another 24% employed people at between $10 and $15 per hour and would have to raise those wages if the minimum moved to $15.
Thirty-four percent employed people at slightly more than $15 and would have to increase pay for some of those employees to deal with wage compression. Thirty-seven percent of companies said they pay much more than $15 per hour and will not be affected by a minimum-wage increase. The Massachusetts minimum wage rose by $1 to $11 per hour on Jan. 1, the final step in a three-year increase.
“While we are empathetic with the challenges facing lower-wage staff, it is also the case that we will employ fewer hourly employees at higher minimum wages. Each dollar increase costs our company $1.5 million per year,” wrote one employer on the Business Confidence Survey.
Another noted, “this would be too much for the small-business community to absorb. You’ll lose many small businesses.”
AIM believes that raising the minimum wage to $15 per hour, while emotionally appealing and politically expedient, is an ineffective way to address income inequality. Raising the minimum wage, in fact, represents a fundamental distraction from addressing the real economic impediments that prevent all Massachusetts citizens from sharing in the state’s prosperity. These are the same impediments, ironically, that contribute to the persistent skills shortage that threatens innovation and economic growth in Massachusetts.
Workers are ultimately compensated according to the skills, education, work ethic, and value they bring to the enterprise.
Minimum-wage increases impose an arbitrary standard of value on entry-level jobs, disproportionately burdening small businesses while creating no long-term improvement in living standards for people at the lower end of the wage scale. The issue in an economy with a staggering 3.3% unemployment rate is not how to raise the wage but instead how to raise the economic value of each employee.
Consider a sandwich shop in Cambridge serving food to employees of companies such as Google, Biogen, or Novartis that have made Massachusetts a global center for information technology, biosciences, research, and development.
Given the degree to which those highly paid professionals are bidding up housing and other prices in Massachusetts, increasing the minimum wage for the restaurant workers represents a dead-end and pyrrhic victory that keeps them outside the economic mainstream.
The task instead should be to pave the way for those restaurant employees to cross the street and join the high-value economy, which will once and for all allow them to support their families and achieve financial stability.
How does that happen? Start by improving the ability of our educational system to teach all students, reducing the long waiting lists for vocational schools, making community colleges accountable for graduating students with the skills needed in the marketplace, creating more high-tech software-coding academies, and promoting other efficient structures to provide people with the skills to succeed in the areas of fastest economic growth.
Those tasks are far more complex than raising the minimum wage but ultimately more effective. The alternative is not attractive.
Christopher Geehern is executive vice president of Marketing & Communication at Associated Industries of Massachusetts.