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August 18, 2019Cart

Business

by Fairfield County Business Journal
by FCBJ

$15 minimum wage could dampen business climate, some observers say

When Gov. Ned Lamont signed the minimum wage bill into law on May 28, he was surrounded by cheering supporters, including state Sen. Julie Kushner (D-Danbury), a co-chair of the state Labor and Public Employees Committee, as well as other legislators, business leaders and workers.

But not everyone is pleased as the hourly rate will go from the current $10.10 to $11 on Oct. 1; $12 on Sept. 1, 2020; $13 on Aug. 1, 2021; $14 on July 1, 2022; and $15 on June 1, 2023. Further wage increases are to be indexed to the federal employment cost index.

A Waterbury medical device manufacturer, Forum Plastics LLC, made headlines even before Lamont got the bill by saying that the $15 rate would cost it roughly $1.2 million. Job cuts are expected to take place over the next six months. Remaining employees are girding to pay more for their health insurance and the firm has threatened to relocate out of state some time in the next four years.

“We’ve had a couple of conversations with other private companies that have said they’ll probably close up shop, or keep their headquarters here but move their operations to other places,” Connecticut Business and Industry Association Vice President, Government Affairs Eric Gjede told the Business Journal. “I think we can expect more and more headlines like that in the coming weeks.”

Using Congressional budget office data, the fiscally conservative Washington, D.C., think tank Employment Policies Institute in January estimated that a $15 minimum wage would cost the state approximately 15,531 jobs by 2020, and that doing the same at the national level, where the minimum has been $7.25 since 2009, would cost roughly 2 million jobs.

Gjede predicted that youth employment will take a downturn because of the $15 rate as fewer companies will be willing to pay that much to train new workers who may not stay with that particular job for long. High turnover rates at jobs paying the minimum wage are not unusual. According to a report by research firm Work Institute, some 42 million employees (at all wage levels) were expected to leave their jobs last year, with employers paying $600 billion in turnover costs.

One such company is Danbury’s Benay Enterprises, which provides back-office administrative management and bookkeeping services for companies nationwide.

“It will make it tougher for me to hire people,” Benay President Dawn Reshen-Doty said. “I pay 100% of my employees’ health insurance and have a matching IRA program. I’m going to have to take a deeper dive into those costs going forward. At least it’s going up gradually, so we can at least do some planning for it. It would have been catastrophic if it went straight to $15.”

On the employee side, Reshen-Doty said the increase “looks really great. It’s hard to live in Fairfield County when you can’t bring in more than $16,000 to $18,000 a year, plus the cost of insurance.

“But as an employer,” she continued, “it makes my costs go up and I can’t just pass them on to my clients. They’ll just say, ‘That’s your problem. It has nothing to do with the services you’re providing us.’ ”

Reshen-Doty indicated that she may have to move Benay out of Connecticut. “It’s possible,” she said. “Our business is growing — but I’m not sure if it’s going to continue to do so in Connecticut.”

Joe McGee, vice president, public policy and programs at the Business Council of Fairfield County, said he doubted the hourly increase would have much of an impact on its members, who for the most part are larger companies, not the restaurants, retailers and other smaller businesses that typically pay minimum wage.

“What the state is doing with minimum wage has a minimal effect on our membership,” McGee said. “But for smaller businesses working on tighter margins, it could be different.”

As for possible links between minimum wage increases and the job market, McGee said he was unconvinced.

The Connecticut Department of Labor and Connecticut Voices for Children estimate the increases will raise wages for approximately 130,000 workers this year and more than half a million by 2024.

Connecticut is the seventh state — along with New York, Massachusetts, Maryland, California, Illinois and New Jersey, and Washington, D.C., — to pass a law requiring a $15 minimum wage to be in place by 2025 at the latest.