Small business owners around the state are preparing for two minimum wage hikes in 2020.
The minimum wage for most employees in Illinois will increase to $9.25 on Jan. 1 and then will jump to $10 an hour in July.
“Our members, especially those in downstate small communities, are very concerned because so many of them are the small cafes and restaurants, the small retailers who provide a lot of entry-level jobs for folks in their communities,” said Mark Grant, Illinois director for the National Federation of Independent Business. “They're trying to prepare for it. Some of them have actually started to bump up their prices a little bit so that it's not one big jump when they have to really start paying these higher wages.”
The law calls for annual increases in the minimum wage until it reaches $15-per-hour in 2025.
“We're hearing from some of our owners who are going to see kind of take a wait and see attitude,” Grant said. “See how the first couple of years work out and then they're talking about perhaps laying people off or closing the business if it just doesn't seem to be able to work.”
Ken Jarosch is the owner of Jarosch Bakery, located northwest of Chicago in Elk Grove Village. His business already is taking steps ahead of the expected jump in labor costs.
“We increased the prices to kind of get ahead of the game,” Jarosch said. “I did my math and I'm planning to raise prices roughly 3-to-4% per year so that by the time the $15 minimum wage comes, we are priced correctly and not having to do a large increase towards the end.”
Jarosch said businesses in the service industry, like his bakery, are at a disadvantage when it comes to the minimum wage hike. Most of his lower-paid employees work in the front of the store, where it’s difficult to squeeze more productivity for the increased costs.
“In many respects, our staff up in front tends to be overhead,” Jarosch said. “So an increase in the minimum wage, when a lot of these staff are just standing around waiting for the next customer to come in, that's overhead. All that does is increase the cost.”
Jarosch also said the higher starting wage could result in fewer opportunities for lower- skilled job seekers to find employment.
“If we have to be paying $15 an hour, I want someone who can speak well, particularly in our customer service business,” Jarosch said. “I want somebody who can think a little bit. Maybe somebody who is a little bit more self-motivated and doesn't need quite as much supervision. And at $15 an hour, yeah, I think I should be able to get that.”
Grant said the pending wage hikes, combined with other state policies, are prompting some owners to take action.
“There’s a lot of things happening in our state that have discouraged small businesses,” Grant said. “And so they are packing up the U-Haul and moving to a more business-friendly state where they feel like they're welcome.”
Wisconsin, Iowa, and Indiana will continue to follow federal law in 2020, which sets the minimum wage at $7.25-per-hour. Missouri’s minimum wage will be set at $9.45 in the coming year.
“When you're looking at an 80-percent increase of labor costs in a five-year period, that is very substantial and very hard for our smallest businesses, especially in our rural areas, to be able to withstand and to sustain and keep a business going,” Grant said.