The Rhode Island House of Representatives recently passed H. 7157 – Minimum Wages, which will increase the RI minimum wage to $11.50, effective October 1, 2020. The House bill mirrors the Senate version, which eliminates the need to schedule reconciliation talks. Since the Governor had similar minimum wage increase language in her budget, there would appear to be virtually no chance that the legislation will not pass.

 

The Rhode Island minimum wage has been raised 10 times since 2000, including, every year since 2013, with the exception of 2017. With talk, nationally (state by state), of a $15.00 per hour minimum wage, there is little reason to believe that this upward trend will not continue. The federal minimum wage, by contrast, has been fixed at $7.25 an hour since 2009 and workers in 21 states remain at that minimum. 

 

In an article by Lori Robertson from June 28 of last year, Ms. Robertson states “To hear politicians tell it, wages are rising at the fastest rate in a decade, are the same as they were 45 years ago and are at a 60-year low. And all three claims could be correct, depending on what measure is used to justify it.” So which is it?

 

The graph below, from the Bureau of Labor Statistics, reveals that real wage increase over the long-term peaked in the early 1970s, generally fell throughout the rest of the 1970s, all of the 1980s, and then began a moderate increase in the mid 1990’s. These figures are reflective of the average of the bottom 80% of wage earners.

Other studies show that the top 1% grew their earnings at four times the rate of the bottom 90%. Although it is misleading to rely on a “snapshot” in time,CNBC reported in March of last year, that average hourly earnings rose 3.4% in February, 2019.

 

How much of the recent wage increase is the result of macroeconomics in the general economy and how much is due to legislative intervention by the states is not clear. Although, for the small business owner, it really doesn’t matter. The minimum wage is going up, and, in all likelihood, this trend will continue.

Another question is how does a business owner deal with this? Can they pass the additional expense on to their customers, do they have to absorb it and subtract it from their bottom line, increase employee benefit contribution, or some combination of all of these?

 

All of this boils down to one reality. Come October 1 of this year, all Rhode Island business owners will be required to raise their lowest wage to $11.50 per hour. Businesses need to start planning and budgeting for this now. Obviously this will impact the rate of overtime pay, as well as other payroll issues.

 

Our professionals at ASN want to help you prepare for this rapidly approaching change. Give us a call – we would love to make this transition easier for you.