As the new year gets underway, many Arkansans will be among the millions of workers across the U.S. getting a wage hike as more than two dozen states implement changes to their minimum wage laws.
According to Wolters Kluwer, the global legal consulting firm, a total of 22 states and the District of Columbia will raise the minimum wage in 2019, with 19 of those states implementing increases on Jan. 1. Arkansas will officially start the year with business owners across the state increasing the state’s minimum wage to $9.25 an hour, and eventually up to $11 an hour by 2021.
“While it isn’t unusual for there to be minimum wage rate increases in January, there is a growing trend to increase wages in response to calls for making sure the minimum wage is a living wage,” said Barbara O’Dell, employment law analyst for Wolters Kluwer’s legal and regulatory office in New York City. “The incremental wage increases, including in California and Washington, which are moving minimum wages toward a final goal of $15 per hour, are an example of how states are trying to address this issue.”
The highest statewide minimum wage rate is in the District of Columbia, at $13.25 per hour, followed by Massachusetts and Washington each at $12 per hour, according to Wolters Kluwer. Some of the new wage rates are the result of scheduled, incremental increases set by states in earlier years, including those in California and Washington.
In Arkansas, voters overwhelmingly supported Issue 5 during the Nov. 6 election, approving a 75 cent per hour wage hike from last year’s $8.50 an hour for many workers across the state. Under the initiated act that was supported by the Business for a Fair Minimum Wage coalition and other progressive groups across the state, that standard will then rise to $10 in 2020 and $11 in 2021.
As New Year payrolls go into effect, the statewide business coalition cheered the incremental wage standards, saying they will boost consumer spending, reduce costly employee turnover, increase productivity and customer satisfaction, and help the economy.
“I’ve seen firsthand how paying fair wages has been good for my business. Our low turnover is invaluable when it comes to our customer service and our bottom line,” said Capi Peck, owner of Trio’s Restaurant in Little Rock. “I’m looking forward to seeing the larger beneficial effects for Arkansas as increasing the minimum wage gives needed raises to workers who will then have more to spend as customers at businesses in their communities.”
In Northwest and Northeast Arkansas, other members of the business coalition gave similar rave reviews for the initiated act that officially received 605,784 votes in support of Issue No. 5, which represented nearly 68.5% of the 870,484 votes cast for or against the referendum.
“Arkansans strongly supported the ballot measure to raise the minimum wage, knowing it would be a win-win for working families and businesses,” said Steve Svendson, owner of Svendson Agency in Rogers. “When people earn more as employees, they are able to spend more as customers. And I know from experience that businesses built with fair pay have happier employees and happier customers. That’s a formula for success.”
Added Meg Sebastian, CEO of Sebastian Tech Solutions in Jonesboro: “In raising the minimum wage, Arkansas is telling working people, ‘Stay here, work here, succeed here.’ If we want Arkansas to have more STEM jobs and encourage companies to invest and reinvest in our state for the long term, we need a strong, productive workforce. Raising the minimum wage is an essential element in achieving that.”
According to a report released in September by Arkansas Advocates for Children and Families (AACF), the wage hike would help improve the financial stability of tens of thousands of Arkansas families earning low wages who are still struggling to make ends meet despite the growing economy and low unemployment.
“The increase would be a great first step in reducing our state’s high child poverty rate and giving children a better start in life,” said AACF Executive Director Rich Huddleston, citing data from the Census Bureau that 22.5% of Arkansas children live in families with incomes below the poverty line.
AACF released the report about a month before the Arkansas Supreme Court ruled to keep the minimum wage referendum on the November ballot. Arkansans for a Strong Economy, led by Arkansas State Chamber of Commerce President and CEO Randy Zook, were among several business trade groups that opposed the initiated act and fought to keep it off the ballot.
Since the November election, the Arkansas Hospitality Association, which represents the state’s restaurant and hospitality industry and was part of the chamber-led opposition group, has sought to educate its member on the new wage standards by posting a copy of the 2019 minimum wage poster from the Arkansas Department of Labor on its website.
Despite widespread support by Arkansas voters raising the state’s minimum wage standard through 2021, one University of Central Arkansas (UCA) economist said new regulations will put Arkansas in “uncharted territory” that could possibly lead to more unemployment, a higher cost of living statewide, and other potential downsides.
“Arkansans have actually said … they want to be part of a grand economic experiment taking place in a few states to see if really high minimum wages will really cause a lot of unemployment, or if it is an easy fix to raise the income of the poorest workers,” said Jeremy Horpedahl, economist at the University of Central Arkansas’ Arkansas Center for Research in Economics (ACRE) center. “By the time it is fully implemented in 2021, Arkansas will have one of the highest — possibly the highest — minimum wage in the country when adjusting for our wage structure and cost of living. Only California’s $15 wage in 2022 will possibly be higher when compared to each state’s median wage.”
But Arkansas will walk alone in its grand experiment. Of surrounding states, Missouri voters also recently decided during the November midterm elections to raise the minimum wage in that state to $8.60 per hour up from $7.85 per hour. The minimum wage will increase by 85 cents per hour each year until 2023, when the Missouri state minimum wage will reach $12 per hour.
According to Wolters Kluwer, Mississippi and several other states’ wages have minimum wage laws that are tied to the federal standard at $7.25 an hour. Still, some states remain on the lower end of the spectrum with state wages coming in below the federal wage rate and slower incremental increases.
For example, Georgia and Wyoming’s minimum wage standards are set at only $5.15 per hour. In Michigan, although the wage is technically rising in 2019, the state recently passed legislation to slow the incremental increase over the next decade.
As proponents of raising the minimum wage gain momentum across the U.S., supporters and business groups are already drawing battle lines for the next possible fight over worker pay. Nearly a year ago, the Trump administration’s U.S. Labor Department announced proposed rulemaking regarding tip regulations under the Fair Labor Standards Act (FLSA) that would allow employers the freedom to allow share tips among so-called “back of the house” employees.
The proposal would help decrease wage disparities between tipped and non-tipped workers – an option that is currently restricted by a rule promulgated in 2011 that has been challenged in a number of courts. The Labor Department’s proposal only applies where employers pay a full minimum wage and do not take a tip credit or allow sharing tips through a tip pool with employees who do not traditionally receive direct tips – such as restaurant cooks and dishwashers.
Already, several progressive groups are working to block the Trump administration’s implementation of the new tip rule. The Washington, D.C.-based Economic Policy Institute, a left-leaning economic think tank that supported a number of successful minimum wage initiatives across the U.S., released a recent report saying the “Trump tip rule” would hurt mostly women that work as waitresses. The report said if the Labor Department proposal is approved, workers would lose $5.8 billion a year in tips, with $4.6 billion “coming from the pockets of women.”