By Pat Pape, Contributing Editor
In November 2015, fast food workers demonstrated in more than 270 U.S. cities, demanding a national minimum wage hike to $15 per hour. The event was organized by the Service Employees International Union, which typically represents healthcare and janitorial workers, but in recent years has focused on organizing fast-food employees.
While economists often debate the pros and cons of minimum wages hikes, a leap to $15 an hour is more than double the current federal wage of $7.25, and no one is certain what impact that increase would have on the nation’s economy or workforce.
Aside from President Obama’s desire to implement a $7.25 to $10.10 per hour minimum wage hike, some municipal leaders—pressured by special interest groups—have tackled the issue themselves. Seattle, San Francisco and Los Angeles have each approved initiatives to hike local wages to $15 per hour.
In New York, the state’s Fast Food Wage Board, which was created in May, recently gave Gov. Andrew Cuomo permission to skip legislative approval and gradually raise the minimum wage to $15 an hour by 2018 for New York City’s fast-food employees and for all fast-food workers statewide by 2021.
Meanwhile, Cuomo wants New York to be the first state in the nation to implement a $15 minimum wage across all industries, a plan that will require legislative consent.
Proponents of a minimum wage hike argue that hourly workers haven’t seen a pay increase since 2009 and say it will stimulate the economy while reducing the expense of social programs, thanks to better compensated workers. Critics claim it would force retailers to accept reduced profits or cause them to raise the price of goods to cover added expenses. Others fear such a wage hike could result in fewer jobs.
Convenience stores that rely on reliable workers as the lifeline for their businesses face the same fears. To remain competitive in their markets, some companies have chosen to increase their wage structure out of necessity. Others are holding back to see what the economic climate brings this year, especially if the $15 per hour minimum wage should become a benchmark.
New hires at Square One Markets, a nine-store chain with headquarters in Bethlehem, Pa., receive a starting salary above the current state minimum wage of $7.25.
“People come to us and this is their first job,” said Lisa Dell Alba, president and CEO of Square One Markets. “You have to start somewhere, and I’m all about paying people what they’re worth. But when you look at that amount of an increase [to $15], it’s significant.”
Dell Alba has no doubt that consumer prices in her stores will increase if the minimum wage ever approaches $15 per hour, and she worries about the changes it could generate in employee scheduling and staffing.
“We used to have that single-employee model in some of our stores,” Dell Alba said. “But because of security and productivity, we now double staff and sometimes triple staff in all of our stores. [With a $15 minimum wage,] we might be forced to have people working by themselves, and that’s certainly not a direction that we want to go.”
According to a study by the Federal Reserve Bank of Chicago, a 10% increase in the minimum wage “lowers low-skill employment by 2-4% and total restaurant employment by 1-3%,” respectively.
Finally, Dell Alba must consider the potential impact on tenured employees who have worked their way up from the current minimum wage and now earn $15 an hour. “So what happens to them?” she asked. “Do they feel that they’re less valuable? Do they get a subsequent increase? It begs a lot of questions.”
IMPACT ON INCENTIVES
Quik Trip Corp. pays all of employees in 725 store locations a starting salary above the current federal minimum wage, plus rewards them with pay incentives based on good attendance, high customer service marks and the company’s annual profits. Quik Trip starts its hourly employees at $9 per hour.
However, a $15 minimum wage, across-the-board mandate would probably handicap the incentives strategy employed by the Tulsa, Okla.-based chain, which operates in 11 states.
“It takes away the incentives,” said Mike Thornbrugh, manager of public affairs for QuikTrip. “Everybody has their own model, and we respect that. But of all of these [minimum wage] proposals I’ve seen, none include the incentives that we provide. It takes away the incentive to get out there and work as hard as you can, which doesn’t make any sense to us.”
With 143 locations in New Jersey and New York, Quick Chek Corp. also pays new hires more than today’s minimum wage, in part to encourage them to enhance their professional skills and move up in the organization.
“The minimum wage is a starting wage, and based on your ability, you grow into higher paying jobs,” said Bob Graczyk, vice president of human resources at QuickChek. “We provide tremendous opportunities, based on ability and performance, to move into higher positions. We offer that to everyone we hire from part-time through management. We want to stay competitive and exceed the minimum wage to attract quality people, but we’re not in favor of the [$15 an hour minimum] at all.”
For retailers with stores in several different cities, the emerging trend of municipalities to set their own minimum wage is concerning.
“We don’t think it makes a lot of sense to take a checkerboard approach, meaning city X has one rate and city Y next to it has a different rate,” said Thornbrugh. “That makes running a business very difficult.”
Dell Alba recognizes that even if one city sets a wage rate that differs from the federal mandate that action could be a challenge for all Square One Markets. “We’re pretty spread out, so if you have a situation where one municipality sets a $15 per hour minimum wage, do we pay everyone that amount?’ she asked. “That’s something we’d have to think through.”
If there is to be a mandated minimum wage increase, “it needs to be uniform for everybody,” Thornbrugh said. “We think that companies that have the type of programs that we do and the pay scale that we do have an opportunity to get better qualified employees. So the marketplace takes care of it.”
The inconsistency in minimum wage rates by city may become an issue, said Lyle Beckwith, senior vice president of government relations at the National Association of Convenience Stores (NACS).
“Companies that operate in different locations find it to be very problematic,” Beckwith said.
NACS lobbies lawmakers on federal—not state or local—issues that have a bearing on the convenience store industry. Currently, the executive board has voted to focus on issues other than the federal minimum wage debate.
“We aren’t opposing or supporting it,” said Beckwith. “That doesn’t mean that we think the minimum wage legislation is a good idea. Our board has decided that there are other issues where we can get involved and be more effective.”
But NACS is not ignoring the issue either. When the NACS executive committee meets for a week in January, labor, salaries and the minimum wage will be among the topics of discussion.
“Clearly, it will raise prices,” Beckwith said of the proposed wage hike. “But this is about more than just paying $15 an hour. It’s not just one thing. It’s about a whole battery of labor issues.”