(The Center Square) – Massachusetts is about to boost its minimum wage on its track to get to $15 an hour by 2023.
The commonwealth will raise the hourly minimum wage in January from $13.50 an hour to $14.25.
Businesses traditionally deal with these wage hikes by raising prices, according to Christopher Carlozzi, Massachusetts state director of the National Federation of Independent Business (NFIB).
“You can only [raise prices] to such a high point before consumers stop spending,” Carlozzi told The Center Square. “We’re at a point now where prices are already inflated, so how much higher can that business go without worrying that that person’s not going to buy a pizza or a cheeseburger or a product on a shelf?”
The wage increase comes amid a labor shortage and supply-chain crisis, which Carlozzi acknowledged creates a different dynamic between employer and employees than before the pandemic.
"Lots of employers offering more wages to get employers to come back," he said.
NFIB’s research found more than 40% of small business owners have increased compensation in an attempt to attract workers, Carlozzi said.
Businesses that can afford to do so already have increased wages, Carlozzi said, while small businesses still struggling to bring customers through the doors will struggle under the burden of a minimum-wage increase.
“You’re going to find particular industries impacted by a minimum wage increase – industries that were hard hit during the pandemic like small retailers, like a lot of the small restaurants and service industry – those ones tend to be most impacted when wage hikes happen, and I would say that’s going to be the same thing we see as we go into 2022,” he said.
Carlozzi noted inexperienced and young workers usually are the ones crowded out by a wage increase. A business will be less willing to take on the burden and expense of training a new worker when they will be required to pay them more, he said.
A policy shift Carlozzi would like to see is Massachusetts offering a “teen or training wage,” which allows employers to pay a proportion of the minimum wage to workers under a certain age. He pointed out this brings young people into the workforce where they receive training in necessary job skills and gives businesses a financial break.
Another consequence of raising wages is some business reduce employees’ hours to compensate, Carlozzi said. He pointed to studies around Seattle’s minimum-wage increases as an example.
“Employers will cut the amount of hours individuals work in order to offset the cost, so they may be making more per hour, but they’ll end up making the same or less at the end of the day,” he said.
The final option for employers when struggling to make payroll with higher wages is reducing staff, Carlozzi said. This means some may lose their job or miss out on a job that would otherwise have been there, while those who remain employed could face longer hours and more rigorous working conditions as businesses operate on skeleton crews.
Carlozzi said the current labor shortage could impact the usual market reactions to minimum wage increases, but doesn’t think the damage will be fully mitigated.