How Are Area Businesses Responding To Missouri’s Minimum Wage Increase?

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By Mike Scott

Missouri’s minimum wage increased on January 1, 2021, and most workers now make at least $10.30 per hour, thanks to Missouri voters who passed Proposition B in 2018. The law requires that the minimum will increase to $11.15 per hour in January of 2022 and to $12.00 per hour in January of 2023, and then be indexed annually to the cost of living.

In Clark County, voters approved Proposition B by a 1393-1248 margin.

All Missouri businesses are now required to pay, at minimum, $10.30 per hour, except retail and service businesses whose annual gross sales are less than $500,000. Tipped employees must be paid at least 50 percent of the minimum, or currently $5.15 per hour, plus any amount necessary to bring the total compensation to at least $10.30 per hour.

Notably, public employers, such as school districts and local governments, are not required to pay the minimum wage, though many choose to do so.

The wage increase raises the employee cost for private businesses and public employers across northeast Missouri, impacting them in different ways.

For example, if a small business had five part-time employees earning minimum wage, each working 25 hours, the employees saw in increase of $21.25 per week, or a little over $1100 per year. The business’ payroll expenses increased by more than $5500 per year, plus FICA and FUTA contributions. Business owners must also wrestle with question of whether to raise other employees’ wages who were already above minimum by a similar amount.

NEMOnews Media Group reached out to several of these area businesses and public employers to see how their operations are adapting to manage the increase. Are they going to decrease hours, have fewer employees, raise prices, or make other adjustments?

We agreed not to name the privately owned businesses that responded, because they are just that-privately owned. Public employers receive taxpayer money, and spoke on the record.

“The minimum wage increases do not apply to governmental positions including public school employees,” Clark County R-1 School Superintendent Dr. Ritchie Kracht said. “All of our full-time staff are above the new minimum wage.”

At Scotland County R-1 schools, “All non-certified positions were adjusted to meet or exceed minimum wage requirements for 2021 when we adopted the 2020- 2021 School Budget. The average salary increase for the following positions resulted in a 2.3% increase in salary,” said Superintendent Ryan Bergeson. Those positions included head cook, cook, bus driver, secretary, Parents as Teachers, custodians and paraprofessionals.

Clark County Sheriff Shawn Webster said, “This will not affect my office due to all my employees making more than $11.15 an hour.”

The picture is different for many private employers.

“My business is not affected because our income is less than $500,000 per year,” said one small service business owner. “However, if it did, my husband and I would likely run our business ourselves, and likely our employees would have to find employment elsewhere.”

A local retailer stated, “We have had to raise to the $10.30 starting wage at all locations. Most of our staff was above that already as we had worked the essential pay they were getting into their base pay. Store hours were cut back due to Covid but will remain cut back with the wage increases. We had several 24-hour stores that will not be going back to 24 hours. We also sharpened the pencil on labor and worked on cutting it back in anticipation of the wage increase. We will also be evaluating our cost of goods on all categories and will likely be taking price increases as an added measure to help offset the expense increase. We have also partnered with technology companies to help increase sales through cashierless checkout and curbside that we have yet to roll out. For the 2022 increase, we will look to do similar things.”

Another retailer responded:

“We currently have three full time employees. Two of them were already being paid above the $10.30 minimum wage and one was being paid the old minimum of $9.45, so I have had to raise that person’s wage accordingly as of the first of January. We usually start our employees at a wage that is in line with their experience, and since there is not a large pool of people in the area with experience (in our business), that means the starting wage is the minimum wage. We then give increases in wage based on how quickly an employee gains skill and ability in the performance of their job. Some get pay increases quickly and some, sadly however, peak at that minimum wage rate. I guess to answer your question about the impact on our business, we are just going to “eat” the increased expense for the time being, but we may need to be more choosy about a person’s experience and abilities when they start with us in the future. New employees may not be good enough to even warrant an increasing government imposed minimum wage as a starting rate of pay like they have in the past. It is not feasible to raise our prices because our customers are already too eager to point out how our prices compare to the big box stores. Our prices, as they stand today, are compatible with those stores, even though they have a price advantage due to the volume of product they purchase from the vendors.

I am actually more concerned about what is happening on the federal level with a new president pushing for a $15.00 minimum wage. If that comes to fruition, we will have to reduce our staff by one person to make up for the added expense. That means as owners we will have to take up the slack and work more hours to make up for the cut in staff. Since we are an S-Corp, we pay ourselves a wage but many of those extra hours will go undocumented so as not to throw off the books. I can see the possibility of things getting bad enough that it would no longer make sense to work for no pay in order to keep a small business viable when you could draw a better wage working for someone else.

These are just my opinions and I don’t pretend to speak for any business other than my own, but I consider it a huge overreach of our government in their socialist desire for “income equality” to tell a business owner what the value of an employee is. I learned a long time ago that there is no room for a b-team member in our business. The only employee we can afford is one who is considered a part of the a- team and that way of thinking will be even more crucial as the government forces us to pay higher wages.”

Restaurant owners took a hit after hit in 2020, starting with last year’s minimum wage increase, then food cost spiked due to Covid, followed by being forced to close or limit their operations because of the virus. Those that survived still face challenges.

“I did have to raise a few employees to the new minimum wage,” one area restaurant owner reported. “They were in between the old wage and the new minimum. These were mainly high school students. My older employees make more than that.”

“I will not decrease hours or staff,” he added. “I did raise prices last year in anticipation of the wage, and will raise prices next year, when the new wage hits. All employees received a comparable increase in wage. I am generally in favor of raising the minimum wage, but people will have to understand prices will rise to compensate. No one makes the minimum wage at my business after a few months, and it is mostly high school students that start there.”

Another restaurant owner said the minimum wage increase raises the price of everything.

“It’s not just my employees,” he said. “It costs my suppliers more, so food and supply costs increase. Because I’m paying employees more, my payroll taxes increase. Because of higher gross revenue, by liability insurance increased. I counted seven different ways costs increased for me.”

He was able to absorb more than half of the wage increase last year. As the impact of Covid grew, he was hit by food cost spikes, which he had to pass along to his customers.

In 2021, the weekly payroll increased by about $535, or over $27,000 annually. In addition to just the minimum wage employees, he increased the wages of his longevity employees too.

“I felt like I needed to increase them, too,” he said. “They needed to stay ahead of someone just starting.”

“I have to pass some of the costs on to our customers,” he said.

He also said that he is looking at every area of expenses, including hours of operation, to save money.

This owner also expressed concern for the future.

“Times are so slow right now,” he said. He noted that people’s habits have changed, and many are eating at home.

“We just don’t know what to expect,” he said.

NEMOnews Media Group, owns newspapers and news websites in Kahoka, Memphis, Edina, Shelbyville, Milan and Palmyra.

“All of our employees were above the old minimum wage of $9.45 per hour,” said Publisher Mike Scott. “We had to raise the hourly pay of a handful of employees, most of whom were part time. It’s less than a hundred bucks a week, so we’ll make it work.

“2020 was tough year for small businesses, and it forced all small business owners to take a hard look at our operations,” Scott added. “For us, a lot of the tough choices are behind us, but we’ll keep looking for ways to save money. Going forward into 2021, we have some new revenue plans we’ll be rolling out in the coming months which will both help us financially and allow us to better serve our readers and advertisers.”