How high is too high for the hourly minimum wage?
Massachusetts raised the minimum wage to $11 an hour last month and became one of the highest-paying states in the country for low wage workers. That increase, up from $10, is a benefit to those cashing in their paychecks, but it can put a strain on local businesses that absorb those added costs.
Rich Cooper, owner of Cooper’s Corner and State Street Fruit Store, supports the minimum wage increase. It’s a position he’s held since 2014, when he was shocked to discover how the value of the minimum wage had eroded over the years.
“It levels the playing field,” Cooper said. “Our employees are the most important part of our business.”
Cooper employs some 90 people between the two stores. He pays out 1,800 employee hours per week. When the hourly minimum wage goes up, the cost is an additional $1,800 a week before employer tax is tacked on.
Once an employee has been at the store for six months, they get a raise. The higher minimum wage has a bumping affect, he added, because a person working at $11 per hour before the threshold went up need a raise to remain above minimum wage.
“We run pretty lean. We don’t have a fancy office and we all multitask. I’m loading the trucks alongside anybody else,” Cooper said. “We can’t just raise our prices, because that hurts our customers. The money has to come from some place.”
But the hike is worth it, Cooper says, for what he calls his “middle bracket” of lower wage employees. The way he sees it, many of his employees who work at or around minimum wage fit into three categories.
Some of those workers are high school students, who may not depend on their wages to make ends meet. Cooper estimates he has employed some 720 teenagers over the years at Cooper’s Corner and State Street Fruit Store.
“People love seeing somebody who is their neighbor, or their babysitter. We’ve had brothers and sisters work here. The manager at State Street, their parents had worked for us,” Cooper said. “This seems to be the place people come to when their kid reaches 15. It’s a responsibility for us to make sure their first job is a positive experience.”
Half a dozen are retirees, who work at the stores as a second job.
But for that middle group, people in their 20s and 30s, the higher minimum wage can really ease their burdens.
“It makes a really big difference,” Cooper said, mentioning a higher minimum wage can have a positive impact on employees who are responsible for things like rent, car payments and student loans.
The new minimum wage does seem a bit high for high school employees who don’t need to support themselves, Cooper said, but the benefit the wage grants to those who are working to pay the rent and support families is worth it.
Kitty Callaghan, of Living Wage Western Mass, agreed a higher minimum wage can increase quality of life for employees — particularly when it comes to employee morale and employee health.
“If the workers are healthier, there is less absenteeism, less crime in the community,” Callaghan said.
Callaghan founded the Northampton Coalition for a Living Wage in 2006. In 2009, she drafted a living wage resolution for the city of Northampton, which was unanimously passed by City Council.
Callaghan has determined a living wage for Western Massachusetts workers is $12.17, based on cost of living. In Northampton and Amherst, the living wage is higher, at $13.18 an hour.
“The statistics that we have, even the $12.17 or $13.18 an hour, those wages are for one person,” Callaghan said. “It doesn’t take into account if you have kids … When we were working on the last minimum wage increase, we found there were quite a few people who are not teenagers who are working at mimimum wage jobs.”
An $11 per hour minimum wage may give employers pause when they receive applications from teenagers who have never worked before. A starting wage that high can seem like a high price to pay for a young person just learning the ropes.
While $11 an hour puts Massachusetts among the states with the highest minimum wage, plans are afoot here and across the country for much larger increases.
Minimum wage advocates are hoping to build momentum behind a state bill filed in January that would hike the minimum wage to $15, affecting nearly 1 million people, according to State House News Service.
The bill was filed by Arlington Sen. Ken Donnelly and Worcester Rep. Dan Donahue, both Democrats, to raise the wage floor to $15 by 2021.
A year-round 40-hour-per-week job at a $15 hourly rate would work out to $31,200 annually.
Talk of further increases has parts of the business community worried, while supporters of a higher wage floor say it could shrink the widening income inequality gap.
Not so fast, others say. According to two recent surveys conducted by the Associated Industries of Massachusetts, a $15 minimum wage would drive up compensation costs for three-quarters of Massachusetts employers, the Boston Globe reported.
The employer association found that 13 percent of companies surveyed employed people at $10 an hour (the former state minimum wage); 24 percent had workers that earned between $10-$15 an hour; and 34 percent paid people just above $15 and would have to boost their earnings to compensate for lower wages rising.
One employer said that each dollar will mean fewer hourly employees at higher minimum wages. Others may put off hiring or leave the state, the survey found.
Pauline Lannon, one of the owners of Atkins Farms in Amherst, said she will have to carefully look at the business budget in a few months to see the impact of the higher minimum wage.
The minimum wage increase hits the business hardest on Sundays, when workers are paid time-and-a-half. With the $11 minimum wage, time-and-a-half hourly pay comes to more than $17 an hour for employees on Sunday, a sum which Lannon calls “mind-boggling.”
Additionally, it may put teenagers at a disadvantage, she said, because paying $11 an hour and $17 an hour on Sundays could lead employers to hire someone with more experience.
To keep the store sustainable, Lannon says she may have to think twice about keeping the store open for long hours and holding special events on Sundays. Atkins Farms has two Amherst locations, one on West Street and another in the Mill District.
Lannon added that the minimum wage increase hits local businesses harder than it hits big box stores, because national companies can more easily absorb the $11 an hour minimum wage in Massachusetts when they only have to pay employees $7.25 an hour in neighboring New Hampshire, for example.
But a higher minimum wage may hold benefits for local businesses, Callaghan said. When people have extra money in their pocket, shopping locally may be more fiscally possible.
“If wages go up, people have more money to spend in the local economy,” Callaghan said. “In Massachusetts we are trying to take care of low wage workers, that’s very clear. It’s a real benefit to almost everybody for people to make higher wages.”
Stephanie Murray can be reached at stephaniemur@umass.edu