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Nicole Lunger/Missouri Business Alert

As Missouri mulls Proposition B, some small businesses tout upside of higher minimum wage



A full-time worker earning the minimum wage in Missouri currently takes home $314 a week, or about $16,000 a year. Tony Wyche, spokesman for Raise Up Missouri, doesn’t believe this is enough.

“The minimum wage has not kept up with the increasing costs of the basics that everybody needs: food, rent, health care, transportation,” said Wyche, whose organization advocates for a higher minimum wage in the state. “All of these things have gone up in cost, but minimum wage has not kept pace, which means people are falling farther and farther behind.”

Missourians will vote in November on Proposition B, which would raise the state’s minimum wage to $12 by 2023. More than 400 Missouri businesses have come out in support of the wage hike, hoping increased labor costs will be offset by the economic benefits.

Leigh Lockhart, the owner of Main Squeeze Cafe in Columbia, is one of the business owners supporting an increased minimum wage. She doesn’t believe Proposition B, which would increase the wage floor by 85 cents per year until 2023, will impact her restaurant’s profitability.

“I think that the bottom line is 85 cents an hour to a business like mine is not going to affect my bottom line because I’m going to offset it in other ways,” Lockhart said.

Lockhart said she would increase prices of her products to offset increased labor costs, but she also believes that her profits would increase with higher wages because her workers are also her customers.

“I expect it to make me more money because my employees are going to have more money to spend,” Lockhart said. “My goal is to have my starting wage at $12 by the end of 2019 because I want to be ahead. I want to show businesses, ‘Hey, this is what I did, and it’s working. And we’re still profitable.’”

Laura Huizar, an attorney at the National Employment Law Project, believes increased labor costs would be balanced out by the economic benefits of a higher minimum wage.

“While a minimum wage increase will increase labor costs for businesses, there are a host of other factors that come into play to reduce the total cost for businesses,” Huizar said. “One of those is a reduction in turnover. The second is the increase in productivity. And the third is the increase in consumer spending, which actually increases consumer demand.”

Huizar says business owners realize that the more money low wage workers have, the more they will spend in the local economy.

“We’ve seen that small businesses across the country support increasing the minimum wage,” Huizar said. “It appears that they understand from their experience running businesses that if we raise wages for workers across the state, we’re putting more money in the pockets of workers who are most likely to spend it.”

Lockhart has already begun raising wages for long-term employees. She says increased wages have made her less wary of job turnover.

“One of the big things that’s changed in my business since we started raising wages is I’m much more comfortable,” Lockhart said. “Now that I’m paying people (more), I know that they value the job, and I feel really proud. When you see them being able to achieve things that they’ve wanted because you’re paying a better wage, that’s the best feeling in the world.”

According to the National Employment Law Project, the cost to hire and train a new employee is approximately 20 percent of their annual salary.

“A lot of the research around turnover looks at the impact of either higher wages at the firm level or beyond that,” Huizar said. “I think what has been established is that higher wages will lead to lower turnover in a wide range of industries.”

Pam Hausner, who owns Kansas City-based design firm Big Vision Design and also runs a residential cleaning service and meditation studio, believes that raising wages can help improve productivity and customer service.

“If their employees are stressed and worried about how they’re going to pay their bills and how they’re going to get by, they’re not focused employees,” Hausner said. “For the people that work for me, they were the ones that met with my customers. So, I needed to make sure they were happy so that happiness could be passed along.”

Patrick Ishmael, director of government accountability at the Show-Me Institute, a think tank that promotes free markets, said a higher minimum wage can lead to unintended consequences like job loss and increased prices for goods and services.

“The problem is there are unintended consequences,” Ishmael said. “When you raise the cost of labor, often times you’ll see business reduce hours, raise prices, move to automation or some combination of those things. If you can keep the job at a higher wage, that is terrific. But the problem is that is not always the case.”

Huizar believes there is evidence refuting those claims. A 2017 study of Bureau of Labor Statistics data found that total employment grew by 10.1 percent in states that had raised their minimum wage between 2013 and 2017, compared to only 8.2 percent in states with no increases.

“One of the main arguments is always the idea that if you raise wages, labor costs will go up and people will lose their jobs,” Huizar said. “We actually can point to more than 25 years of extensive economic research that concludes time and again that states can increase their minimum wage without reducing employment. We’ve also seen that increasing the minimum wage does not necessarily lead to a rapid acceleration of automation.”

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