Employees within the state of Missouri will see a rise in wages as the annual adjustment of the state’s minimum wage was raised.
The Missouri Department of Labor and Industrial Relations has set next year’s minimum wage at $7.50 an hour, a 15 cent raise from the current wage of $7.35.
In 2006, Missouri voters approved a ballot that would require the state to annually adjust the minimum wage based on changes in the Consumer Price Index. The CPI is a measure of the average change in prices for consumer goods and services. Northwest economics professor Ben Collier believes that though this is appropriate for a country with a minimum wage law, it may not be entirely beneficial.
“The law demand says that if you raise the price, buyers want less,” Collier said. “They are either going to hire fewer workers or each worker will work fewer hours. What the minimum wage law does is just focuses on the money compensation part.”
The Missouri group Jobs with Justice supported the ballot in 2006 and says it is good for the economy but still is not enough for some families. The Missouri Chamber of Commerce is even saying that this could make it harder for some businesses to employ people. The change will raise Missouri’s minimum wage 25 cents higher than the federal average.
“What is not seen is all the secondary effects: who’s gonna lose their job, who’s gonna receive less training, who’s gonna lose fringe benefits,” Collier said. “When you take those things into consideration, you’ll see it’s not as simple as politicians want you to believe… it’s certainly not a way of attacking poverty, which is what a lot of supporters of minimum wage will talk about.”
Changes could be coming in places other than Missouri, however. President Barack Obama made an announcement Nov. 8 that he would support a plan that would raise the federal average from $7.25 an hour to $10.10 an hour. In his State of the Union address in January, he backed a similar initiative that was a dollar lower. As of press time, the town of Seatac, Wash., which is trying to up its minimum wage to a national-record $15 an hour, was at a 46-vote lead in favor of increasing the wage, according to the Seattle Times.
Democrats within the Senate are pushing for this raise in the minimum wage in time for 2014 elections. According to US News, Missouri is a battleground state, as well as Alaska, where this issue will be a deciding factor if Democrats are to take seats away from Republicans. This is due to the fact that a March Gallup poll found that 71 percent of voters said they would support increasing the federal minimum wage to $9 an hour.
“(Studies have shown that) when the minimum wage increases, there is less training,” Collier said. “What that does is it shows up later in their earnings path… they don’t get that higher wage later on. A profit maximizing firm is not gonna hire a worker at $10 an hour if they’re only worth $7.”
However, this is an issue that some experts say is the reason the United States is behind Western European countries in unemployment rates.
Scott Sumner, an economist teaching at Bentley University and the creator of the blog TheMoneyIllusion, did a study that solidified this.
“(In Western Europe) there are nine countries with a minimum wage,” Sumner said. “Their unemployment rates range from 5.9 percent to 27.6 percent. There are nine countries with no minimum wage. Five of the nine have a lower unemployment rate than the best of the group.”
Sumner also discusses how Europe’s biggest country, Germany, has no minimum wage and has an unemployment rate of 5.2 percent. Its unemployment rates used to be much higher until labor reforms occurred that allowed for more lower-wage jobs and subsidies.
While these issues are discussed in the future, Missouri employees will continue to stand on a higher pile of cash than some thanks to its state voters.