What Minimum Wage Changes Could Mean for Your Business

Wednesday, January 20, 2021

When the Senate decided against including a $15 minimum wage amendment in the 2021 COVID-19 relief package, a ripple effect occurred in the national discourse. Minimum wage has been part of the conversation ever since, and it's likely additional legislation will be introduced for further debate at some point in the future.

That has reinvigorated the national discussion about minimum wage. It’s likely additional legislation will be introduced for further debate at some point in the near future.

If changes are made to the law, they will have a considerable impact on the economy, job pool, and potentially your payroll.

Minimum Wage Map

Where We Are Now with Minimum Wage Changes

The federal minimum hourly wage for covered, nonexempt workers was set to $7.25 in 2009, where it has remained since.

Research shows that almost all of the changes around minimum wage since 2009 have happened at the state, city or county level.

The current federal minimum wage is only used in 21 states, according to the Pew Research Center.

Even so, that collectively accounts for about 40% of all U.S. wage and salary workers —roughly 56.5 million people.

That’s why it’s worth your time to follow this topic. Even if the federal minimum wage rate remains the same, it’s likely the broader conversation will spur some lawmakers to update their state’s minimum wage laws.

Monitoring the minimum wage conversation and considering what actions you’ll take in the event of changes can keep the situation from becoming a stressful surprise.

Where Minimum Wage Change Could Lead
CEPR Minimum Wage

The Center for Economic and Policy Research published several articles in 2020 detailing how the federal minimum wage would now be over $24/hour if it had kept pace with inflation and productivity growth (as it did until 1968).

As their work went viral, though, one important detail seems to have gotten lost. The Center’s Dean Baker explains:

“We can’t imagine that we can just raise the minimum wage to $24 an hour without serious disruptions to the economy, many of which would have bad effects (i.e., unemployment) for those at the bottom. While there is certainly room to raise the minimum wage, and many states have done so with no measurable impact on employment, there clearly is a limit to how far and how fast we can go.”

The relationship between the cost-of-living and the minimum wage is an important part of the discussion. While all sides agree that the cost-of-living has increased since the minimum wage was last increased in 2009, some assert that low cost-of-living locations like Tulsa, OK, should have a significantly lower minimum wage than cities like San Francisco or New York.

What Minimum Wage Changes Means for Your Business 

No matter what happens, it seems unlikely the minimum wage discussion will go away anytime soon.

It’s reasonable to assume small businesses operating in the high-cost of living states are more likely to be impacted by state-level changes to the minimum wage. For instance, on May 1, 2021, Virginia increased their minimum wage to $9.50/hr.

So what are the next steps for business owners?

A simple first step is making sure you’re following the Fair Labor Standards Act (FLSA) guidelines already in place that govern minimum wage, overtime pay, recordkeeping and more.

It can get complicated making sure you’re up-to-date on the latest Department of Labor rulings on tipped employee regulations or clarifying the standard for employee versus independent contractor status, but the Department of Labor website has a library of handy information.

If you’re looking for information specific to your situation, Heartland Payroll has lots of helpful tools to help you navigate the changing wage landscape.

For instance, our payroll platform’s digital recordkeeping capabilities mean you can get the data you need — without piles of paperwork — at any time. Heartland HR sends automatic email alerts when changes relevant to you happen on the local, state or federal levels.

And if you just need to talk it out with another person, our HR on Demand service connects you to a Society for Human Resource Management (SHRM) certified HR professional for unlimited, one-on-one guidance on tough topics.

Image Attributions

“When it comes to raising the minimum wage, most of the action is in cities and states, not Congress.” Pew Research Center, Washington, D.C. March 12, 2021.

This is What Minimum Wage Would Be If It Kept Pace with Productivity” by The Center for Economic and Policy Research is licensed under CC BY 4.0.


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