Somewhere between the coverage of plummeting oil prices, better-than-expected economic reports and fake stock market savants, we lost sight of a debate that’s raged for the past few years: what happens when you increase the minimum wage?
With little fanfare, 20 states are about to find out.
According to the Washington Post, minimum wage increases will sweep through 20 states and the District of Columbia starting on the first day of 2015. Of those states, 9 increases are automatic: those states have legislation that ties the statewide minimum wage to increases in inflation (this is called “indexing”). In 11 other states, however, the increase is tied to a law or referendum that presumably reflects changing public sentiment.
For those that aren’t aware, the federal minimum wage is set at $7.25.
States can go about setting their own minimum wage, which explains why 29 of them will have a wage higher than the federal minimum as of the first. Barring some specific exceptions, employers in any given state are required to pay the higher of the two wages.
Large retailers, such as Wal-Mart, have to grapple with indexed wage changes each year. Because of increased focus this year on the minimum wage, however, more states than usual increased their minimum wage: only 10 did so in 2013 and 8 did in 2012.
A statement from a Wal-Mart spokesperson said that, in order to maintain profitability in the face of minimum wage increases, the company would compress wages of its more highly paid employees. That means that there will be less pay differentiation between highly ranked employees (such as managers) and new hires.
By the same token, the company is “unlikely to cut staff or reduce hours” to keep its operating budget (which increased 3.5% over the past quarter) down. That’s in the face of a new drive by Wal-Mart to “improve service in its stores.”
For more information, check out the original article on the effects of the minimum wage increase over at Reuters.