Starting Jan. 1, the minimum wage across Massachusetts rose from $12 to $12.75 for hourly employees, and from $4.35 to $4.95 for tipped employees.
It’s the start of a series of increases that will occur every Jan. 1 until 2023, when the minimum wages will reach $15 per hour and $6.75, respectively.
According to the Massachusetts Budget and Policy Center, the increase this year will provide 420,600 workers across the state with an overall $410 million wage increase. That increase will benefit 45 percent of food service workers, 25 percent of retail workers and 61 percent of tipped workers. Among those benefiting from the increase, 89 percent are adults, 40 percent are people of color and 60 percent are women.
It may be a win for the lowest-paid employees, but employers and business organizations are keeping a wary eye on the mandated increases, which come into effect as they grapple with other factors affecting their bottom line.
Chambers of commerce across the region have worked to keep their business members informed of the requirements associated with employment law changes through workshops and information sessions, and provide them with avenues to voice their concerns to state legislators.
Combined with the requirements of the Massachusetts Paid Family Medical Leave Act that went into effect this year, smaller businesses will especially feel the financial crunch of the minimum wage increase.
“Small businesses are the lifeblood of our community and we believe it’s imperative to support them and not put barriers in place that make it difficult to impossible for them to thrive,” said Greater Lowell Chamber of Commerce President/CEO Danielle McFadden.
Despite the good economy, hiring is difficult for many positions, she said. Jobs are plentiful, but there are not enough qualified, fully trained workers to fill them, McFadden said.
“Between that, paid family medical leave and now the minimum wage increase, businesses are having to choose between scaling their business and staying status quo or even cutting back on number of employees and benefits,” she said.
Nashoba Valley Chamber of Commerce President & CEO Melissa Fetterhoff said a common concern she’s heard among her members is that raising the minimum wage doesn’t just affect wages for the lowest-paid workers.
“When raising the minimum of what a pay for a position might be at, they have to look at the people who have been in the position awhile and readjust accordingly,” Fetterhoff said. “So it’s a forced measure of having to increase wages across the board.”
North Central Massachusetts Chamber of Commerce President & CEO Roy Nascimento said the minimum wage increase will impact all industries, but the most affected will be service businesses such as restaurants and retailers, which are often the first entry into the work world for young people.
He said many companies are already paying above the minimum wage because of the fierce competition for talent in this economy, but it will have a ripple effect.
“When the minimum wage goes up, more experienced workers that are already paid above minimum wage will expect an increase as well,” Nascimento said.
Phasing in the increase to $15 per hour over time makes it more manageable for businesses to absorb than a single, full increase, Nascimento said, but they will face challenges that may not be immediately apparent.
Facing increased costs, businesses will pass that expense onto customers, or find a way to reduce expenses somewhere else – like payroll, he said.
Nascimento said he’s concerned it will slow the momentum in North Central Massachusetts, “a region that’s well-positioned for growth.”
For businesses in North Central and Greater Lowell communities, proximity to the New Hampshire border means competing with businesses in a state where the minimum wage is set at the federal level of $7.25 per hour – and there is no sales tax on goods.
“There is some concern, particularly among retailers and other businesses that are price sensitive, that customers may choose to take their business next door to New Hampshire, and purchase something that they can purchase here there because it may be cheaper,” Nascimento said.
Jeff Schwarz, president of AlphaGraphics of Shirley, a franchise-owned printing and marketing company, said he doesn’t expect the minimum wage increase will impact his business right away. It will, however, set the expectation of higher wages for all employees, he said.
“It essentially pushes the floor of the cost of our labor up,” Schwarz said, and may eventually mean having to explore cost-cutting measures like outsourcing of certain services.
He said he has a total of seven employees in Shirley, and everybody is cross-trained to handle multiple duties. At a small company like his, it’s critical for employees to be flexible and able to respond to getting customer orders out in an “all hands on deck” manner, he said.
Schwarz, of Harvard, has owned his AlphaGraphics franchise since 2004, and has weathered other minimum wage increases in the past. But he expects this increase to have a much larger impact than those in previous years.
Just a decade ago, Schwarz said he wasn’t facing the regional competition that he is now, nor was he having to contend with large, online printers — and the expectation of instant gratification in the “order today, get it tomorrow” world of online sales — to the degree he is today.
“Now I’ve got pressure on both sides,” he said. “I’ve got national market offers, people are offering things for lower prices out there, and I’ve got my labor costs going up, and I’m getting squeezed in the middle.”
Schwarz said most of his employees are salaried, and started at well above minimum wage. But as the wage floor rises, he said it’s likely he will have to slow down on hiring and bring in people closer to minimum wage on a probationary period to make sure they’re the right fit for the business and reduce risk.
He said the minimum wage increase is “not this huge pending doom wrecking ball that’s going to come across and wipe me out. But it’s the relationship of the employees with the business, with the market, and it does mean that we can no longer just hire a one-dimensional person – you’ve got to have people that can do multiple things.”
Instead of cutting hours as some employers might do, Schwarz said he prefers to stagger employee shifts over the day to ensure all business hours are covered and reduce overtime costs.
“It also means, on the sales side, working harder and more aggressively to get more business, because our costs are higher,” he said.
It also brings the opportunity to have discussions with his employees and engage them in higher-level thinking about how to increase efficiencies, use automation and grow the business, which can in turn increase their value — and wages, Schwarz said.
With approximately 3,700 employees, Lowell General Hospital is one of the largest employers in Greater Lowell and about two-thirds of its budget goes toward wages and benefits.
About 200 LGH employees, who work in such areas as housekeeping, food services and entry-level clerical work, will be directly impacted by the rising minimum wage standard.
“Lowell General Hospital is committed to being an employer of choice for the region by providing competitive wages and benefits to our employees. To accomplish that, we plan to maintain a minimum wage for our employees that exceeds the state imposed standards,” according to a statement provided by LGH spokesman Will Courtney. “Resulting adjustments to wages for positions that pay above minimum wage, and additional assessments for the Paid Family and Medical Leave Act, will result in approximately $1 million in additional expenses over the next year. To adjust to these rising costs, we will continue to find creative ways to bring down expenses and the overall cost of care while maintaining the high level of quality and care our community has come to expect.”
Another large employer, Great Wolf Lodge, which operates an indoor water park resort in Fitchburg, shared similar sentiments.
“We strive to be an employer of choice, where talented individuals actively look for opportunities to join the Great Wolf Lodge pack. Along with a collegial and compassionate work environment, we offer comprehensive benefits and competitive wages,” Great Wolf Resorts Director of Corporate Communications Jason Lasecki and Great Wolf Lodge New England General Manager Henry Tessman said in a joint statement. “A majority of our starting wages are already above the new threshold set for 2020, and we will continue to evaluate our compensation structure to ensure we are attracting high caliber talent now and into the future. As a growing company, we’ve had a number of young people who have gone from part time job at Great Wolf Lodge to a long, fulfilling career with us.”