This November, the Arkansas minimum wage increased– and will continue doing so over the next few years. What are the implications for small businesses?
Arkansas businesses could be handing out larger checks to minimum wage workers come Jan. 1, 2019. On November 11, voters approved a bill to increase the Arkansas minimum wage from $8.50 an hour to $9.25 starting Jan. 1, 2019. The wage will increase to $10 on Jan. 1, 2020 and again to $11 on Jan. 1, 2021. The ballot measure passed with 68 percent of the vote.
The Arkansas Minimum Wage Act covers employers with 4 or more employees, according to the Arkansas Department of Labor.
The bill is now an approved law. If the state legislature wants any modification, it will require a 2/3 vote by the state’s House of Representatives and the state’s Senate.
The federal minimum wage remains $7.25 an hour.
Impact on businesses
Business owners in Arkansas are divided over the move. Walmart, which is headquartered in Arkansas and is the largest employer in the nation, raised its starting pay to $11 an hour earlier this year, and Arkansas Children’s Hospital system is raising its entry-level pay from $10.10 an hour to $14 an hour on Jan. 1, 2019. The companies aren’t on record as having taken a stance on the Arkansas minimum wage vote.
However, Arkansans for a Strong Economy (a group that includes the Arkansas Chamber of Commerce and other groups representing a wide swath of Arkansas businesses) challenged the ballot initiative in court and lost. Arkansas Republican Gov. Asa Hutchinson called the move a “job killer.” Hutchinson and business leaders said they fear the state will lose jobs and businesses to nearby states that still offer the federal minimum wage of $7.25 an hour. Missouri also voted in November to increase its minimum wage from $7.85 an hour to $8.60 on Jan. 1, 2019 and then to $12 an hour by 2023. However, Oklahoma, Louisiana, Kansas, Mississippi, and Tennessee still pay their minimum wage workers $7.25 an hour.
Studies on the impact of minimum wage hikes haven’t yielded definitive results. Researchers at the University of Washington found in a recent study that Seattle’s higher minimum wage lifted pay, and associated the minimum wage ordinance with an eight percent reduction in job turnover as well as a significant reduction in the rate of new entries into the workforce. However, The Economic Policy Institute has criticized the study, arguing that the job losses were negligible and that the study methodology was flawed. A study by U.S. Census researchers found inconclusive evidence about whether jobs are lost or hours are scaled back in places that have raised minimum wages.
Some say raising the minimum wage produces a net gain because when the minimum wage goes up people have more money to spend and increased consumer spending allows businesses to expand.
Highest effective minimum wage
The Washington Post has reported that between the state’s low cost of living and modest salaries, entry-level workers in Arkansas will soon be better off than in places such as California, New York, and the District of Columbia, which are hiking their minimum wages to $15 an hour. The Arkansas minimum wage will rise in stages to $11 by 2021.
By 2021, a minimum wage worker in Arkansas will earn nearly 70 percent of the wages earned by a median worker in the state, according to Jeremy Horpedahl, assistant professor of economics at the University of Central Arkansas.
2018 minimum wage hikes
Eighteen states increased their minimum wage in 2018, according to the National Conference of State Legislatures. Eight states — Alaska, Florida, Minnesota, Missouri, Montana, New Jersey, Ohio, and South Dakota — automatically increased their rates based on the cost of living. Ten states — Arizona, California, Colorado, Hawaii, Maine, Michigan, New York, Rhode Island, Vermont, and Washington — increased their rates due to previously approved legislation or ballot initiatives.
Federal minimum wage
Currently, 29 states and Washington, D.C., have higher minimum wages than the federal rate, which hasn’t been raised since 2009. Most of the increases occurred within the last four years, with 23 states pushing up their minimum wage laws since January 2014.