34 HR Magazine September 2017
it really makes it untenable for a tight-margin business like ours,”
says Eric Oppenheim, SHRM-SCP, CEO of Republic Foods
Inc., which operates 17 Burger King franchises in Maryland and
Washington, D.C., and contends with an array of local minimum
wages across several counties. “An entry-level job is not a $15-an-
hour job when you’re charging $2 for a hamburger—it defies the
laws of economics.”
Rise of the Machines
To stay in business while complying with the law, many in Oppenheim’s position have started replacing workers with machines.
“What we’re seeing in many industries, especially the fast-food
industry, is they’re turning more to electronic means of getting
customers to place their orders,” says Frank Cania, SHRM-SCP,
president of driven HR, a Pittsford, N. Y.-based firm that helps
small and medium-sized businesses with regulatory compliance.
“In Panera Bread, there were usually five or six cashier spots.
[But] if you look at the newer stores or the stores they’ve remodeled, there are two cashier spots and five to eight [self-service]
kiosks,” he notes. “The speed with which they’re implementing
some of these things has increased because of … increases in labor
costs.” Many fast-food restaurants and grocery stores have followed suit, possibly prompting those in other industries to invest
more in automation as well.
That’s something Joe Dutra, owner of Reno, Nev.-based Kim-
Impact on Middle-Income Jobs
mie Candy, has considered. The candy-maker, which has 38 full-
time employees, spends 60 percent of its product cost on labor,
paying above Nevada’s legislative minimum to attract workers
who could earn $12 an hour in the area’s booming construc-
tion industry. Because his products compete with candy made
in Mexico and China—countries that have much lower labor
costs—Dutra can’t easily raise prices. So if the minimum wage
gets too high, he’d need to cut employees. “We almost can’t have
less people making the candy, but we can have less people pack-
aging it if we automated it,” he says. “Right now we don’t care
because it’s not critical,” but at some point bringing in new equip-
ment becomes more cost-effective than using minimum-wage
labor. “The equipment would pay for itself in a couple of years.”
Even businesses without many minimum-wage workers are taking notice of what’s happening with minimum-wage legislation.
“Almost daily we’re hearing updates,” says Lisa-Marie Gustafson,
SHRM-SCP, HR manager at Hexcel in Mount Vernon, Wash.,
a manufacturer of airplane parts that employs more than 6,000
people worldwide, most of whom are hourly. Though the company has no minimum-wage employees, Washington state’s hike
to $11 per hour this year, which will rise to $13.50 in two years,
According to newly released Labor Department data, in this
past quarter, weekly pay for the lowest earners (those in the
10th percentile) rose faster since this time last year than for any
other group of workers.
“The minimum wage is being raised to a level where those
jobs that were once considered good middle-class jobs”—like
working on an assembly line—“are now being viewed as ‘that’s
pretty much minimum wage’ or ‘[that] will be minimum wage in
a couple of years,’ or ‘there’s not much difference between that
job and being a cashier at a department store,’ ” Gustafson says.
The pay compression she describes happened at Curriculum
Whether you’re thinking about voluntarily raising your workers’ minimum
wage or doing it to comply with state
or local mandates, experts recommend
considering the following:
1. What are the ancillary impacts?
Ponder not just the cost of raising the
floor, but the potential effect—both
financial and emotional—on those in
higher-earning jobs that might now be
close to the new minimum. If you boost
too much without planning for the
effects up the ladder, you risk substantial labor loss and morale problems.
Think about the impact on recruitment,
2. How much money is needed to
as well. For example, although paying
a higher minimum would likely make
it easier to recruit for low-wage jobs,
your ability to attract workers ultimate-
ly depends on what other employers in
your area are offering.
live in your region?
Look at cost-of-living data relative to
the location of your company, including the wages that would be necessary
to afford the basic costs of food, rent
and other necessities. Review regional
and industry-specific salary data.
3. Are there ample advancement
Make sure there is a clear path in
4. What’s the impact on hiring and
place by which motivated employees
can advance to higher pay rates. This
benefits you whether you can afford a
minimum-wage increase or not.
Following an increase, look carefully at
before-and-after engagement scores
and turnover data. This will help you
give management a fuller accounting of the return on investment of the
5. What else can you offer workers
besides higher wages?
Many workers want full-time hours, for
example, or would prefer getting paid
Weighing Wage Changes: 5 Questions to Ask