The minimum wage battle took center stage Tuesday night in Oregon, as voters in the city of Portland rejected a proposal to dramatically increase minimum wage in the city. But the pressure is likely to continue as workers’ rights groups and some politicians continue to push for higher minimum wages across the country.
Seventy-two percent of employers with minimum wage workers say they currently do not have a plan to pay those workers above the mandated rate, according to Aon Hewitt’s U.S. Minimum Wage Practices Survey, released today.
Additionally, of those organizations, 59% reported they will not address any changes until minimum wage increases become law. In the interim, they plan to adjust wages, as needed, through current salary review cycles.
“There does appear to be political undertones that employers are considering as they formulate their strategies,” says Ken Abosch, broad-based compensation practice leader at Aon Hewitt. “Some of that has to do with the fact that the Obama administration is a labor friendly administration.”
There is some unconfirmed speculation that the White House may attempt to pass an executive order addressing federal minimum wage rates before the end this administration, he adds.
“The majority of employers are taking a ‘wait-and-see’ approach, and do not plan to make any changes until new regulations are issued and they assess the actions of their competitors,” Abosch says. “Organizations are very sensitive about increasing one of their largest fixed costs and overall expense categories, and many of them simply don’t see any advantage to increasing their labor costs at this time.”
Also see: “The minimum wage wave rides on.”
A lot of employers just simply don’t see the advantage of increasing minimum wages until the law requires them to do so, he adds. “The remaining 28% who have made proactive changes, have done so because they believe it will give them a competitive advantage on talent.”
Among those employers that are boosting their minimum wage, 77% are doing so because they believe it will give them a competitive advantage in attracting new workers and 76% are doing so because they believe it will help them lower turnover or increase retention.
Also see: “Employment policies: Can one size fit all?”
“Some employers are telling us that even though it could result in higher costs in some markets, it is easier for them to manage to a consistent [minimum wage] rate nationally,” says Abosch. “The key is to set the rate at a level that is compliant with all of the local regulations. Why employers wouldn’t do that is that they can save some costs in different markets by having different minimum wages; however, that may not outweigh the administrative complexities.”
Aon Hewitt's survey examined responses from 135 major U.S. organizations that employ labor at minimum wage, and was developed to better understand how employers are likely to address the impact of a government mandated increase to minimum wage rates.
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