A higher minimum wage is less than two weeks away, prompting excitement from low-income workers and advocates and a shrug from business owners in Northwest Arkansas.
Arkansas voters in November decided the state's minimum wage will go to $7.50 per hour starting Jan. 1 for any business with at least four employees, up from $6.25 per hour and 25 cents above the federal minimum. The raise pushes the minimum full-time annual income to $15,600, just below the federal poverty line for a family of two.
At A Glance
The Impact Of A Higher Wage
A Northwest Arkansas Times analysis of U.S. Bureau of Labor Statistics data on job growth, overall employment, average earnings and performance of different industries across the country shows minimum wage hikes can be tied to both positive and negative results. The data don’t establish cause. For example, states with higher wages in the first place might be more likely to raise the minimum than other states, instead of the other way around.
The analysis found:
• Job growth this year was slightly faster in states that raised their minimums Jan. 1. Those 13 states had an increase in jobs of 1.63 percent between January and October, the latest figures available, compared to 1.52 percent in the states without an increase. The difference translates to an average of almost 7,000 jobs per state. Arkansas was near the bottom with 1.2 percent growth.
• The job growth was reflected in most industries, including retail and food service jobs that are more likely to make the minimum. Finance and manufacturing typically didn’t enjoy as much job growth as other industries.
• Average and median incomes are higher where minimum wages exceed the federal $7.25 mandate. The average worker in the 29 higher-minimum states made almost $47,000 between May 2012 and May 2013, compared to about $42,000 on average elsewhere. Arkansas’ average was about $37,000.
• Unemployment in October was lower in states that didn’t raise the minimum wage this year, at 5.6 percent. In states with the January raise, it was 5.9 percent. Arkansas’ was 6 percent; Northwest Arkansas’ was 3.9 percent.
Source: Staff Report
At A Glance
2015 State Minimum Wages
As of Jan. 1, Arkansas will join 28 other states with minimum wages higher than the federal $7.25 per hour.
• Louisiana: None (Federal applies)
• Georgia: $5.15
• Iowa: $7.25
• Arkansas: $7.50
• Missouri: $7.65
• Colorado: $8.23
• Alaska: $8.75
• California: $9
• Washington: $9.47 (Highest in the country)
Source: National Conference Of State Legislatures
By The Numbers
A Closer Minimum Wage Picture
The Northwest Arkansas Times focused on three states and the national average to give a smaller comparison of minimum wages and other economic measures, based on U.S. Bureau of Labor Statistics data. Washington has the nation’s highest minimum and increases it each year to keep up with rising prices. Missouri also indexes its minimum, but the value is closer to Arkansas’, and the state’s economy is more similar.
Location*Arkansas*Missouri*Washington*U.S.
Current Minimum Wage*$6.25*$7.50*$9.32*$7.25
Median 2013 Hourly Wage*$13.90*$15.55*$19.67*$16.87
October Unemployment*6 percent*5.9 percent*6 percent*5.8 percent
Number of 2013 Jobs*1.15 million*2.64 million*2.83 million*132.59 million
Change in Jobs since 2006*+3 percent*-2 percent*-2 percent*unchanged
Source: Staff Report
The minimum wage will increase again in January 2016 to $8, and a year later to $8.50.
The change sweeps away a two-tier system in which companies grossing less than $500,000 paid the Arkansas minimum instead of the higher federal level.
Minimum-wage hikes often draw an energetic debate -- an attempt this year to boost the federal minimum to $10.10 failed after opposition from Congressional Republicans. But here the raise has been greeted as good, or at least neutral, news, several experts and residents said.
"Certainly if you're going to have this policy, phasing it in is the smart thing to do," said Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas.
About 44,000 people in Arkansas made either the federal or state minimum last year, or 7 percent of the hourly work force, according to the U.S. Bureau of Labor Statistics. That proportion is about 7,000 workers in Washington and Benton counties, mostly in food service, personal services and similar jobs. Thousands more make wages near enough to the minimum to benefit from the raise, according to a study this year from the Arkansas Advocates for Children and Families.
Only three other states had a larger percentage at the bottom.
Jessica Barnett, 20, is among those minimum-wage earners. The University of Arkansas student earns $7.25 an hour at a part-time Subway job.
"I'm barely making it to pay my bills each month," said Barnett, who isn't getting help from her parents. "I have no extra money to go out with my boyfriend or anything; it's just go to work for what I need, and that's it."
Critics of minimum-wage hikes often point out about half of the lowest earners are younger than 24 and are presumably more likely to work summer or entry-level jobs. Barnett responded people like her are still expected to take on adult responsibilities and costs at 18.
"I'm super-excited," she added about the coming bump. "Even if it's not that much, it'll still be a little extra money that I'll have after getting what I need done."
At the other end, business owners and chambers of commerce said the raise should have a small impact on their operations. Two of the area's largest employers, Walmart and Tyson Foods, stayed neutral on the state question. Walmart's CEO said a couple weeks ago the company plans to pay all of its 1.3 million U.S. employees above the federal minimum starting early next year.
Bill Mathews, who co-owns and operates 31 McDonald's restaurants throughout Washington and Benton counties, said only a few, mostly part-time employees make minimum wage at his restaurants. The market for employees generally is too competitive to pay so low, he said.
The raise also will have a ripple effect, helping employees who make within a few dollars of the minimum, but that's just part of the business, he said. For example, someone making $9 or $10 might see a slight boost as the pay floor pushes upward.
"We call it compression," Mathews said, adding he doesn't expect any price changes or layoffs as a result of the wage increase. "We're trying to build our business. As you grow your business, you need to grow your staff."
Making A Difference
Research on the impact of higher minimum wages falls on all sides. Opponents typically find businesses will respond to costlier employees by firing some of them or raising prices. Proponents often claim workers who make more money will also spend more money and are less likely to switch jobs and need costly training.
"We try to keep people as long as we can; in the long term, it's cheaper," said Rob Apple, who has about 30 employees at the Bentonville coffee shop Pressroom. He said he pays most of them $8 or more. "Training's expensive. Turnover's expensive."
As the minimum moves to $8 and above, he'll have to boost wages further to stay competitive, Apple added. He said he didn't know for sure if he'd then raise prices, cut staff or take on the added costs.
"I'd say it's inevitable," Apple added of the wage hike. "We'll just watch it and see."
A report earlier this year by the nonpartisan Congressional Budget Office found mixed results of minimum-wage hikes. Increasing the minimum to $9, for example, could take away 100,000 jobs, it said. But it found almost 8 million workers would have higher incomes and 300,000 could be lifted out of poverty by the same raise.
"I suspect we're going to see a bit of everything, which is what we normally see when it comes to policy changes," Deck said. "The minimum wage has been held so low so long, the effect is unlikely to be as dramatic as it would've been had this happened sooner."
Randy Zook, president of the Arkansas Chamber of Commerce, told the Arkansas Democrat-Gazette after November's vote the impact would be "modest."
"The reality is that there are very few jobs in Arkansas where people can hire people at the minimum wage," he said. "But it will make a difference to some small businesses because they're on such a tight margin."
The raise could make a profound difference for some of the area's homeless, said Jon Woodward, CEO of Fayetteville's Seven Hills Homeless Center, which provides a day center, low-cost housing, training and other programs for about 4,000 people a year. Families with kids and veterans are the most common clients at the center, he said.
More than a thousand of the center's clients each year make or depend on the minimum wage, Woodward said, calling it a "very, very common issue." A $350 rent and $100 of groceries each week would use up roughly two-thirds of the $15,080 someone earns working full time for a year at $7.25 an hour.
The state's minimum will remain below a living wage for at least two years, according to the Massachusetts Institute of Technology's Living Wage Calculator. It found covering typical transportation, medical and other basic costs on top of food and rent requires $8.22 an hour for a person living alone in Washington and Benton counties. That jumps to $17 an hour for an adult supporting one child.
"Raising the minimum wage in my mind is part of the solution, but not the full solution," Woodward said, adding the area must develop midlevel, better-paying jobs for low-income people to move into.
Yessie Hernandez, a Springdale woman who's twice run unsuccessfully for local office, is among those seeking better pay. She's a part-time legal assistant working toward a finance degree with the University of Phoenix online.
Hernandez, 37, worked for minimum wage starting at 18, when she started paying rent to her parents, she said. She had no money left to save. Nowadays she knows Hispanic and Marshallese families with minimum income, living together "like sardines" to save money.
"A lot of people are going to be in better positions because of the money," Hernandez said. "It's not much from what they're making now, but it is going to make a difference."
A Clear Choice
The poverty problem is extremely complicated, Deck said. Minimum wage can help some, but a boosted earned-income tax credit or other policies and general economic growth might accomplish the same without negative side effects.
Wage growth has lagged since 2010, going up about 2 percent each year compared to twice that rate in 2008, according to the nonpartisan Economic Policy Institute.
The overall mixed picture reflects what might be the only established truth about the minimum wage's impact, Deck said: It depends. Location, industry, who's working or moving in and an untold number of other factors play their parts. Some businesses may fail while some workers will be able to make their rent.
"This is one decision made -- you can't look at it in isolation without considering everything that's going on," Deck said. "It's a matter of figuring out how do we value labor appropriately and how do we share the prosperity from technological advancement and progress with everybody. It's not easy."
Arkansas voters approved the measure 2-1, with almost 500,000 votes in favor. Benton and Washington county voters said yes by a similar margin.
No groups formed to work against the measure, according to The Associated Press. Sen.-elect Tom Cotton and Gov.-elect Asa Hutchinson, both Republicans, said they supported it. Cotton stressed he supported it only "as a citizen," and not as a legislator, according to The Hill, a Washington political news outlet. State and local chambers stayed neutral, suggesting there was no consensus among their members or no desire to voice one.
"The writing was on the wall that this is what the people wanted," said Janine Parry, a political science professor who specializes in Arkansas and southern politics and elections. "When the public sends a clear, unambiguous signal that they want to move policy in Direction A, policymakers in every branch usually follow through.
"The normal opponents had something of an out: 'I'm still against big government, I'm definitely against what Obama wants to do,'" Parry added, referring to the federal $10.10 proposal. Such a clear signal doesn't come from the public often, she said, adding with a laugh: "When it does, you'd better get on board."
NW News on 12/21/2014