Is a Domino Effect Caused by Increases in the Minimum Wage?
Talk of raising the federal minimum wage is in the news again. We may think industries that pay their employees at or near minimum wage will be the only industries effected. Businesses such as hospitality, retail and restaurants. Could there be a domino effect to other industries that pay above current and/or proposed minimum wages?
This study reviews data on minimum wage increases, from 2016 to 2019, in the states of Arizona, Arkansas and Oklahoma. It also reviews wage data for 10 random occupations that represent different industries.
Occupational wages are from the Bureau of Labor Statistics (BLS). This is a sample. Scroll down the page to view “Annual Mean Wage of Machinists by State”.
The 10 occupations reviewed were:
- Structural Metal Fabricator
- Tractor Trailer Truck Driver
- Construction Laborer
- Surgical Technologist
State-specific minimum wages were gleaned through general internet research. The current federal minimum wage is $7.25 per hour.
The tables below are a sample of how the data was arranged and calculated.
Minimum Wage Changes by State
Minimum Wage Changes
Machinists Mean Wage Changes by State
Machinist Mean Wage Changes
Findings by State
Arizona had the largest increase in minimum wages. It had the most occupational wage increase for 4 occupations – machinist, phlebotomist, groundskeeper and carpenter. It had the least occupational wage increase in 3 occupations.
Arkansas had the second most increase in minimum wage. It had the most occupational wage increase for 3 occupations – structural metal fabricator, construction laborer and receptionist. It had the least occupational wage increase in 1 occupation.
Oklahoma had no minimum wage increase. It had the most occupational wage increase in 3 occupations – tractor trailer truck driver, surgical technologist and paralegal. It had the least occupational wage increase in 6 of the 10 occupations reviewed.
Oklahoma had the least occupational wage growth in 6 of 10 occupations. Arkansas had the least wage growth in only 1 occupation. This would indicate there is a correlation between occupational wage growth and minimum wage increases even if occupational wages are already above new minimum wages. This is the domino effect.
However, Oklahoma also had 3 occupations with the highest wage growth. This would indicate that other factors are at play. Perhaps the supply / demand ratio for occupations in each state is different. This would mean that free market forces have a role in determining wages as well.
It should be pointed out that the BLS tracks 800 occupations and only 10 were reviewed. Also, statistical anomalies could be in the BLS data.
Thoughts for the Business Leader
Even if you currently pay your employees above recently increased minimum wages, your business may be affected. The supply of skilled workers may be reduced if the monetary incentive to obtain additional training, education and certifications is reduced. Wages for skilled employees may need to be increased to maintain the incentive and attract new employees.
About the Author Greg Conder is the owner of Conder Business Solutions, LLC. He helps businesses prosper through knowledge, diversity, creativity and innovation.