Michael Meuser is no fan of government-mandated raises for his workers, but he isn’t worried about the big increase in Missouri’s minimum wage scheduled for Jan. 1.
Voters decided that the wage floor will rise to $8.60 an hour next year, a jump of almost 10 percent, on its way to $12 in 2023.
Meuser, owner of Pogue Label & Screen in St. Louis, bumped his lowest-paid workers up to $10 an hour when the city imposed a short-lived minimum wage last year.
He could have cut their pay when the Legislature overturned the city law, but he didn’t, for morale reasons.
The minimum wage will affect Pogue when it gets to $12. The plant does screen printing and labeling on plastic bottles, and some of its competitors are in lower-wage states.
“There is clearly a majority of Missourians who don’t understand capitalism and markets,” Meuser said. “I would be more apt to support a higher federal minimum wage than a state or local increase.”
Robert O’Loughlin, chief executive of hotel owner Lodging Hospitality Management, doesn’t think the January increase will have much effect on his company. As the wage floor climbs to $12, though, he says hotels will have to raise prices.
“Like anything else, if your costs go up, you’re going to have to charge more,” O’Loughlin said.
If some businesses can’t raise prices, economists worry that they’ll close or lay off workers. A recent Show-Me Institute study estimates that the new law could cost Missouri 11,000 jobs.
David Macpherson, an economics professor at Trinity University in San Antonio, co-authored that study. He says the job losses are likely to hit hardest in Missouri’s rural counties.
St. Louis County’s average hourly wage last year was $28, but a few Missouri counties had averages under $12. The average private-sector employee in Ripley County, on the Arkansas border, earned just $10.02 an hour.
Workers in those areas may look forward to big raises, but Macpherson says some will probably lose their jobs. He studied 26 years of data on California counties and found relatively steep rural job losses after a minimum wage increase.
“Wages tend to be higher in bigger cities because the cost of living is higher,” he said. “In the big cities there will be some effect, but there will be proportionately bigger job losses in the smaller cities.”
Other research finds little or no job loss overall. Barton Hamilton, a Washington University economics professor who studied the issue last year, found that firms don’t eliminate jobs after a minimum-wage increase, but they do reduce hiring.
That means fewer opportunities for low-skilled workers, including teenagers looking for that first part-time job.
“If it harms their ability to get a job, it’s going to have long-term negative impacts on their pay and future employment,” Hamilton says.
Most minimum-wage research is based on the relatively small changes made in the past. Boosts like Missouri’s 53 percent increase over four years were rare until recently.
Essentially, we’re conducting a giant experiment. With Missouri unemployment at just 3.1 percent, the experiment should work better than it would have with unemployment at 10 percent.
Still, we should expect some people to be left behind: young, inexperienced workers, on whom employers won’t take a chance at the higher wage, and rural residents where $12 an hour is too high for the local economy. We must think about how to help them before taking this experiment too far.