Workers in 12 blue and seven red states will receive a raise today by virtue of a state-mandated increase in their respective minimum hourly wages.
For the ninth consecutive year, North Carolina minimum-wage workers will not join them. They will remain at the federally mandated $7.25 an hour, along with workers in 18 other states.
According to state legislators, worker advocates, analysts and economists, North Carolina is likely to remain at the federal level for the foreseeable future because of a lack of support for an increase among Republican legislative leaders.
“Given the political composition of the General Assembly, I see little chance of a minimum wage hike, although (Democratic) Gov. Roy Cooper will likely propose it,” said Michael Walden, an economics professor at N.C. State University.
The 38,000 federal minimum wage workers in North Carolina are among 700,000 nationwide, according to the U.S. Bureau of Labor Statistics.
An additional 52,000 North Carolinians make less than $7.25 because they work in the restaurant sector, where their compensation is often based more on customer tips.
Rep. Donny Lambeth, R-Forsyth, said the minimum wage remains a subject “of great debate in Raleigh,” in part out of concern for the ever-widening economic gap between urban and rural North Carolina.
“A major part of North Carolina’s economy is still agriculture, and these are heavily low wage with limited benefit jobs,” Lambeth said. Raising the minimum wage would result in “increasing the cost of many of our agriculture products” to consumers.
Lambeth cited that the state’s economy is doing fine overall, with Charlotte and the Triangle consistently ranked at or near the top in business climate studies. The state unemployment rate of 4.1 percent in November remains near a 17-year low.
However, as has been the case for much of the past two years, North Carolinians dropping out of the labor force remains the primary factor for the rate being below the 5 percent threshold that most economists consider as full employment.
When people stop looking for work, they are no longer considered unemployed for the purpose of calculating the jobless rate, which tends to lower the rate. When including those individuals, the jobless rate is 8.6 percent.
Lambeth cited the recent “free market” decisions by BB&T Corp., PNC Financial Services Group Inc. and Wells Fargo & Co. to raise their minimum wages to $15 an hour in response to the federal corporate tax rate cut, signed into law Dec. 22 by President Donald Trump.
“So the market is already adjusting to raising the rate in many industries without government mandates,” Lambeth said. “This is likely how it will continue in North Carolina.”
Rep. Evelyn Terry, D-Forsyth, said she is waiting for data requested about recent trends in relationship to impact on earnings and wealth between majority and minority residents in the county.
“I’m far from an economics expert, but I understand plenty vs want; survival vs near starvation; living wages vs slave wages,” Terry said,
“North Carolina should be ashamed not to raise wages for its load-bearing workforce.”
Sen. Joyce Krawiec, R-Forsyth, said that “we all want higher wages for our citizens. While increasing the minimum wage sounds good to most of us, the evidence shows it can be detrimental.”
Krawiec cited economic studies that show businesses opt to cut back on hiring or trim their work force when required to increase their minimum wage.
“What good is a higher wage if you have no job?” Krawiec asked.
However, other economic studies have demonstrated little, if any, negative impact from minimum-wage hikes in 31 states.
Krawiec said the minimum wage plays a crucial role in helping teenagers get their first work experience. “These jobs are stepping stones for our future employment and job training exercises,” she said.
Some economist argue that more adults have become reliant on minimum wage jobs as their former middle-wage jobs, particularly in manufacturing, have been eliminated over the past 17 years by production being shipped offshore by their former employer.
“We should focus on policies that create economic growth and create more job opportunities for everyone,” Krawiec said. “The result will be competition for jobs and naturally higher wages.”
Getting a raise
Altogether, 4.5 million workers nationwide get a paycheck boost today.
Also receiving a raise — to $10.35 an hour — are employees performing work on or in connection with federal contracts covered by a federal executive order that went into effect Sept. 15.
The raises won’t be large in some states since the increase is tied to inflation or another economic measuring stick.
For example, the minimum wage is going up 4 cents in Alaska to $9.84, representing an extra $83.20 per year before taxes. The largest is $1 an hour in Maine to $10, or an extra $2,080 pre-tax.
Most states are in the 15-cent to 50-cent range, or an extra $312 to $1,040 pre-tax, respectively.
“Although a number of states in recent years have increased their minimum wage above the federal minimum, these states have — with the notable exception of Michigan — fallen into one of two categories,” said John Dinan, a political science professor at Wake Forest University.
“State minimum-wage increases have been passed either by Democratic-controlled legislatures or through citizen-initiated ballot measures in states that allow the public to bypass legislative opposition and place measures directly on the ballot.”
Dinan cautioned that it has been “rare, though not unprecedented, to see the state minimum-wage increase in recent years in Republican-controlled states that lack opportunity for citizen-initiated lawmaking, as in North Carolina.”
Of the 19 states relying on the federal minimum wage, only Texas, Georgia and Pennsylvania have a larger population base than North Carolina.
A full-time N.C. minimum-wage worker earns $15,080 per year — $1,000 less than the federal poverty level for 2016 for a family of one adult and one child. At $11 an hour, a full-time worker will earn $22,800 a year.
In February, about 1,300 local Novant Health Inc. employees had their salaries raised to $11 an hour.
According to Monster.com, there are 11 large retailers who pay at least $11 an hour for full-time employees: Amazon ($14.65); Best Buy ($11.38); Big Lots ($11.17); Costco Wholesale ($13.14); Home Depot ($11.09); Lowe’s Home Improvement ($12.95); Nordstrom ($14.96); Sam’s Club ($11.12); Staples ($11.15); Target ($11); and The Gap ($11.86)
“I think wages are headed higher at retailers as they attempt to distinguish themselves for other potential employers,” said Mark Vitner, a senior economist with Wells Fargo Securities. “There is a lot of competition for workers right now.”
Winston-Salem and Forsyth County civic and elected officials have been encouraged, if not prodded, to raise their respective minimum wages to $15 an hour.
Winston-Salem’s minimum wage has risen from $9 to $11.25 in recent years.
“We plan to recommend to council a raise in the minimum for city employees in June to $12.50,” City Manager Lee Garrity said.
“We also would be working on a plan to continue annual adjustments to reach $15 in a few years.”
However, Garrity stressed that “moving immediately to $15 is cost prohibitive.”
Meanwhile, the minimum county wage is $8.94 an hour, which is paid primarily to part time and seasonal employees, said Shontell Robinson, county human resources director.
Robinson said the county attempts “to pay its employees fairly and equitably based on a comparison of duties and responsibilities, as well as labor market salary data.”
“This requires a pay plan that is competitive, rewards employees based on performance, and is based on fiscal accountability to the taxpayers of Forsyth County.”
Subject of debate
Raising the minimum wage continues to stir fierce debate among analysts and economists across the spectrum.
“A government-mandated minimum wage — at any level — constitutes bad public policy,” said Mitch Kokai, policy analyst with Libertarian think tank John Locke Foundation.
“It works exactly as its original supporters intended: it prices those with the lowest skill levels out of the labor market.
“North Carolina policymakers can do nothing about bad policy enacted at the federal level,” Kokai said. “But they ought to be commended for refusing to compound Washington’s error by raising the government-mandated minimum wage in this state.”
Kokai said “forcing employers to raise wages leads to negative consequences for low-skilled workers: increased automation and fewer opportunities to take jobs that build the types of skills that pave the way for higher-paying jobs.”
On the opposite end of the minimum wage debate are analysts and economists, such as John Quinterno, a principal with South by North Strategies, Ltd., a Chapel Hill research firm specializing in economic and social policy.
“The fact that 31 states have set minimum wages that exceed the federal level has shown that the hypothesized negative consequences did not actually occur,” Quinterno said.
Quinterno said most of the opposition to increasing the N.C. minimum wage comes from industries “that profit from low-wage workers, as well as among certain actors who wield disproportionate political power.”
“That opposition is having some successes, as has been happening when state legislatures prevent local governments from raising minimum wages and/or roll back local wage increases,” Quinterno said.
An overlooked element of the divisive House Bill 2 from 2016-17 — known mostly as the transgender restroom law — is that it prohibited local communities from requiring contractors to pay a set wage above the minimum wage in order to bid on projects.
HB2 supporters said that piece of legislation was included because companies could have been required to pay a higher wage to secure an urban contract than a rural marketplace would have required.
Both sides of the issue
Zagros Madjd-Sadjadi, an economics professor at Winston-Salem State University, said he views the $7.25 minimum wage as an incentive to recruit companies.
“Any minimum wage hike will create winners and losers, even among those of low incomes,” Madjd-Sadjadi said.
“Raising the minimum wage will only end up reducing the incentive to locate here. No amount of tax incentive will be able to compensate for that unless we are going to be paying the company the difference between the new minimum wage and $7.25.”
“In this context, every time another state raises its minimum wage, it could be thought of as incentivizing companies to relocate here and at no additional cost to the North Carolina taxpayer.”
Madjd-Sadjadi said he understands that raising the minimum wage “certainly looks appealing to politicians and the public.”
“It allows politicians to show that they care and are doing something to address persistent income inequality and the hardship that low wages do bring to many North Carolinians.
“It also allows them to require private businesses to shoulder the burden as opposed to government, which resonates well with voters,” he said.
Vitner said the higher minimum wage issue “is a bit more complicated in North Carolina” because of the widening urban and rural economic gap.
“Workers have been remaining in these low-paying positions for longer periods of time because there has been so little growth in mid-skilled positions, particularly outside the major metro areas,” Vitner said.
“One possible solution would be to have a multi-tier minimum wage, with a higher wage in major metropolitan areas and a lower minimum wage — not lower than the current minimum — for smaller metropolitan areas and rural areas.
“The same is true for full-time positions and part-time and seasonal positions.”