What is Missouri’s New Minimum Wage Law?

Many states and regions increased their minimum wage requirements this November. Here’s what Missouri’s new minimum wage law means for small businesses.

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What to know about Missouri's new minimum wage law

Missouri voters recently endorsed a higher entry wage for workers. On Nov. 11, Missouri voters approved an increase of the state’s $7.85 an hour minimum wage to $12 an hour over the next five years. The minimum wage will jump to $8.60 in January 2019. It will gradually increase by 25 cents per year until reaching $12 per hour in 2023. Missouri’s new minimum wage law passed with 62 percent of the vote.

Employers engaged in retail or service businesses whose annual gross income is less than $500,000 are not required to pay the state minimum wage rate and can pay employees wages of their choosing, according to Missouri Department of Labor.

State of confusion

Increasing entry-level wages seemed to be stymied when Missouri’s General Assembly enacted a law in 2017 that preempted ordinances passed by St. Louis and Kansas City to boost local, entry-level wages. St. Louis had raised its minimum wage to $10 an hour. Under an ordinance approved by the city council, Kansas City voted to raise the minimum wage to $13 by 2020.

After the move by the local jurisdictions, the Missouri General Assembly approved legislation that prohibited local governments from raising their cities’ minimum wages above the state level, which at the time, was $7.70 an hour, the Kansas City Star reported. The Missouri Chamber of Commerce and business industry participants praised the bill, claiming that employers would avoid the areas in the state with a higher minimum wage because of increased labor costs and arguing the higher minimum wage would worsen unemployment in urban areas.

Business industry participants claimed that the higher minimum wage would worsen unemployment in urban areas due to labor costs.

Adding to the confusion was the fact that the St. Louis law which increased the minimum wage to $10 had already been in effect for months before the state pre-emption law was scheduled to go live, according to the St. Louis Post Dispatch. Some business owners said they had already put into place the $10 rate and would keep it.

Proponents of a minimum wage increase then began gathering signatures for a public vote that would force change.

Recent proposal wins

The latest effort to increase the minimum wage rate was backed by a number of labor groups, including the SEIU, Jobs with Justice and the AFL-CIO. A coalition of businesses, Missouri Businesses for a Fair Minimum Wage, said it received the endorsements of 700 Missouri businesses on a petition supporting an increase in the minimum wage, which ultimately lead to Missouri’s new minimum wage law.

They were opposed not only by the state’s legislature, that has reportedly rejected proposals to increase the minimum wage every year since 2014, but also by Missouri’s Chamber of Commerce and Associated Industries of Missouri, the state’s oldest business association. The business associations said an increase to the minimum wage drives up the costs of doing business and hurts employees.

Impact of increase

Missouri’s new minimum wage law means that the effective minimum wage – the distance between the minimum wage and the state’s median pay — would be among the top 10 in the country, outranking more liberal New York and Massachusetts, the Washington Post has reported. This law ensures that people at the bottom of the wage pyramid will earn close to what the middle class does.

This law ensures that people at the bottom of the wage pyramid will earn close to what the middle class does.

The Massachusetts Institute of Technology has calculated that the “living wage” needed in Missouri for a full-time worker is $10.76 an hour for a single adult. For an adult with one child, MIT says the living wage is $23.45.

Missouri’s new minimum wage law wasn’t the only law of its kind passed in November. Arkansas voters also voted to increase the state’s current minimum wage of $8.50 an hour to $9.25 on Jan. 1, 2019. The wage will increase to $10 on Jan. 1, 2020 and increase to $11 on Jan. 1, 2021.

The states nearby to Missouri offer a range of minimum wages. Iowa, Kansas, Kentucky, and Tennessee offer a minimum wage of $7.25, while Illinois’ minimum wage is $8.25 and Nebraska’s entry-level wage is $9 and, according to the LaborLawCenter.

The federal minimum wage is $7.25 an hour. It hasn’t been raised since 2009.

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