Jennifer J. Walsh McNees Wallace & Nurick LLC Graphics Coordinator Scott Halfond
HARRISBURG – Small businesses in Pennsylvania and their customers would be among the most affected by a boost in the state's minimum wage, a Scranton attorney who represents business clients and employers says.
Those businesses could include retail, transportation and some manufacturing, said attorney Jennifer J. Walsh, of McNees Wallace & Nurick in Scranton.
Depending on the amount of a minimum wage increase, Walsh explained that businesses "that operate on the smallest profit margins and where labor makes up the majority of operating costs, such as the fast food industry" would most feel the sharpest wage increase pinch.
"If the business has no choice but to pass on the increased costs of labor to customers - and that's a big 'if' - the customer base could shrink, forcing even higher prices for the product just to keep the business afloat," Walsh continued.
"This could result in a downward spiral and spell the end for the business. This is one of the reasons business clients of all sizes should seek counsel with regard to strategic planning for potential minimum wage hikes."
After all, Walsh pointed out, businesses in Pennsylvania do have options to consider in advance of a possible increase in the state's minimum wage.
"Just two options include restructuring, not necessarily a layoff, and/or voluntarily stepping up the minimum wage in affordable increments before any legal mandate is enacted," Walsh said.
"With a measured review, some creative thinking and progressive action, businesses can get ahead of any impending major change in labor costs in the low-skilled spectrum rather than reacting in a panic."
Walsh represents business clients and employers in state and federal courts, as well as before various administrative agencies, in arbitrations, wrongful termination, sexual discrimination/harassment, wage and hour claims, and other business related legal matters. She previously spent more than five years as an Assistant U.S. Attorney in the Middle District of Pennsylvania, in Scranton, as trial counsel for the U.S. government in civil cases.
Pennsylvania is one of 14 states with a minimum wage that matches the federal minimum wage, according to data maintained by the U.S. Department of Labor's Wage and Hour Division. The others are New Hampshire, Indiana, Kentucky, Virginia, North Carolina, Wisconsin, Iowa, Kansas, Oklahoma, North Dakota, Texas, Utah and Idaho.
However, more than half of the states in the U.S. have a minimum wage higher than the federal minimum wage. These include all the states that border Pennsylvania: New York, where a minimum wage of $9 an hour went into effect Dec. 31, 2015; New Jersey, where the minimum wage is $8.38 per hour; Maryland, where the minimum wage is $8.25 per hour; West Virginia, where the minimum wage is $8.75 per hour; and Ohio, where the minimum wage is $8.10 per hour for employers with annual gross receipts of $297,000 or more, and equal to the federal minimum wage for employers in that state with lower annual gross receipts.
It has been about a decade since Pennsylvania last enacted an increase in the state's minimum wage, according to information on the state's Minimum Wage Act Advisory Board's webpage. At that time, the Minimum Wage Act implemented a wage schedule, inlcuding exclusions and exemptions, that incrementally raised the hourly minimum wage from $5.16 as of Dec. 31, 2006 to the present $7.25 July 24, 2009.
The state's 60-day training wage, since July 24, 2008, remains at $6.55 per hour.
Pennsylvania's minimum wage for tipped employees is $2.83 per hour if an employee receives more than $30 per month in tips. When an employee does not earn that much in tips, the employer is required to make up the difference.
Walsh pointed to several bills that have been introduced in the state legislature to raise the state's minimum wage. Those bills range from recommendations for an annual Cost Of Living Adjustment (COLA) to the phasing in of more significant fixed raises over time. The latter includes a proposal for wages that level off at $15 per hour and a reversion to COLA increases.
These bills presently are in various committees, and Walsh said she knows of none that have yet made it out of committee.
"Essentially, neither the House nor the Senate have had the opportunity to entertain any of the proposed bills," she said.
Meanwhile, debate continues outside the Pennsylvania General Assembly with a number of organizations in favor of and against raising the minimum wage in the state.
"Both sides of the minimum wage issue have political and economic policy implications," Walsh said. "From a practical management perspective, the benefits of an increased minimum wage could include improving workforce morale, which can positively impact quality and productivity.
"Better productivity can lead to a healthier bottom line. A higher minimum wage may also help to lower employee turnover, which will save an organization the costs associated with retention issues.
"From the worker's perspective, proponents say that raising the minimum wage above federal poverty level could make a world of difference to the minimum wage earner's every day life. Economically, a higher minimum wage could also infuse more discretionary spending into local economies to the benefit of local businesses."
However, some opponents of a higher minimum wage in Pennsylvania maintain raising the wage would cause "significant job loss for the very constituency the increase was designed to help," Walsh said.
"The fear is that employers, who are likely in very competitive industries and markets, will slash positions in reaction to the rising, and potentially prohibitive, costs of labor, or try to recover their increased labor costs directly from workers by instituting new costs, such as parking fees, or reducing employee benefits," she said.
"Other detractors feel that mandating minimum wages actually keeps those wages low, and emphasize that a true capitalist system where businesses are free to compete without so much government regulation will drive up demand for lower skilled labor and organically result in higher wages."