C-stores cast a wary eye toward various minimum wage initiatives that could impact workforce costs.
By David Bennett, Senior Editor
Because most convenience retailers strive to retain the most capable employees, it’s common that hourly wage rates at c-stores often eclipse the respective wage rate mandated by the state or states that they operate in.
Recently, however, c-stores have contended with a host of state legislators around the country who are pushing living wage mandates. As a result, convenience retailers are re-evaluating their internal policies to determine if they can absorb additional wage hikes to remain competitive with other area businesses when it comes to attracting high quality workers.
Lawmakers in Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Rhode Island, Vermont, West Virginia and Washington, D.C. enacted increases during the 2014 session, while voters in Alaska, Arkansas, Nebraska and South Dakota approved minimum wage increases through ballot measures, according to the National Conference of State Legislatures.
As of Feb. 24, 2015, 29 states and the District of Columbia count minimum wage rates above the federal minimum wage of $7.25. But the federal rate might soon change. In late 2013, President Obama endorsed the Fair Minimum Wage Act (H.R. 1010) that will increase the minimum wage in three steps, from $7.25 to $10.10 per hour.
The rate will then be indexed to inflation each year thereafter.
WAGING RATES
In Idaho, a legislative proposal on the table would increase the state’s minimum wage from $7.25 per hour to $8.50 this year and $9.75 next year. If it comes to pass, Idaho’s $9.75 per hour minimum wage in 2016 would zoom to among the nation’s highest. Of areas that have already approved future rate increases, Washington, D.C. will have a minimum wage of $11.50 per hour in 2016, while California and Massachusetts will raise their minimum wage rates to $10 per hour. Alaska would match Idaho at $9.75 per hour, under the current law.
Sandy Bolinske, human resources director for Boise, Idaho-based Stinker Stores, said the retailer already pays more than Idaho’s current rate of $7.25 to remain competitive in Idaho’s wage market. Currently, Stinker employs about 350 employees in its 66 stores throughout Idaho.
“We have internally set our minimum wage to be $8 an hour for our customer sales specialists, so we really don’t see an impact with the minimum wage regulations that we have right now because we’re paying above that,” Bolinske said. “We made that determination about a year ago and it’s been pretty effective in allowing us to be competitive in the market. There are some pockets in Idaho that we have to go above that $8 per hour, particularly those that butt against the state of Washington, which has $9.19 per hour.”
Oregon has the second highest rate at $9.10 per hour.
However, Bolinske acknowledged that raising Idaho’s minium wage rate to $9.75 would force Stinker to look closely at its annual workforce budget for hourly workers.
C-stores have done well promoting higher wages across the industry in an attempt to entice reliable workers, according to Lyle Beckwith, senior vice president of government relations of the National Association of Convenience Stores (NACS).
“Our members tend to pay above the prevailing wage to attract quality employees and retain them, although that wage is different in different parts of the country,” Beckwith said. “The federal minimum wage doesn’t really take that into account.”
ON THE BORDER
Often mandated wage hikes are passed on to consumers. However, hiring can become convoluted when border states have discernible different minimum wage rates in place. For example, Wisconsin legislators are viewing a proposal that would require Wisconsin, by 2017, to have a minimum wage of $10.10—more than 13% higher than any bordering state and 39% higher than at least four other Midwest states, currently.
That type of situation can become convoluted for c-stores looking to recruit or expand in certain states, Beckwith said.
“Where you have issues, more so, is when states raise wages and you have stores on one side of the border, or have stores on both sides of the border, and there’s a different wage rate on either side and you have to recruit people—that creates a different set of circumstances—depending on what side of the border you’re on,” Beckwith said.
Stinker doesn’t just rely on wages to snare qualified workers, but includes other benefits like a company 401K program that’s offered to all of its employees. Still, wages play a part in Stinker’s strategic planning, including the day the c-store expands its operation across the Idaho state line.
“You continually have to look at those starting wages and the impact that that’s going to have on your organization,” Bolinske said.
RISING TIDES
The saying “a rising tide lifts all boats” is associated with the idea that improvements in the general economy will benefit all participants in that economy. However, some reports indicate that living wages in the U.S. aren’t rising quickly enough to stem the tide of inflation, and thus are ultimately chipping away at the retail sector’s profit center.
A recent Center for American Progress report showed that the median married couple with two kids in the U.S. made the same in 2012 as they did in 2000 after adjusting for overall inflation, but the growing cost of basic middle-class security—education, health, housing and retirement—left the family with $5,500 less to spend on other needs.
Some observers say that combating such wage stagnation in the U.S. is the real reason behind Walmart’s recent announcement that it voluntarily plans to raise its workers’ minimum wage from $7.25 an hour to $9 this April and $10 by 2016.
Whatever the reason, more public and private stakeholders are coming to the conclusion that an hourly wage increase for American workers is overdue.
“Wages for all, except the folks on the higher end of the economic spectrum, have been flat for decades,” said Rick Wartzman, executive director of the Drucker Institute at Claremont Graduate University. “So, this is a real response to the squeeze that they’re feeling.”
PAY IT FORWARD
Neil Trautwein is the vice president of healthcare policy at the National Retail Federation (NRF). He explained that the federation disagrees that government bodies should dictate the outcome of wage rates, but rather believes the issue should be determined in the marketplace.
“We think the choice of wages and what it takes to attract the kind of employees that a particular convenience store or another retailer would like to get, that’s something the market helps develop and individual store philosophy helps develop,” Trautwein said. “We tend to be very suspicious of mandated increases because they tend to displace jobs, because they tend to challenge already razor-thin profit margins. So we don’t think mandated wage increases are an appropriate strategy for the government to take.”
Trautwein pointed to Seattle’s city council, which in June voted to raise the minimum wage of $9.47 in increments to $11 by April 1, and to $15 an hour by 2017—for larger businesses with at least 500 staffers.
The new law has businesses owners and other states watching as the wage debate intensifies. Predicting that the initiative will prove a heavy burden to area retailers, the International Franchise Association argued that Seattle’s ordinance also discriminates against its members by lumping smaller franchisees in with big businesses.
Granting small area businesses more time to phase in the increase, the Seattle law defines them as having fewer than 500 employees.
While it’s important that hourly workers have a good standard of living, dropping every retailer in the same legislative bag via government-stipulated minimum wage rates isn’t the best economic option for commercial employers.
“What one company can pay isn’t necessarily what another company can pay,” Trautwein said. “That’s why we object to mandated, across-the-board increases because they have no reference to that company’s bottom line. We think it’s a strongly misguided policy.”
