Posted By:

Trish Barnes on July 25, 2014

Massachusetts Minimum Wage to Rise – How Will This Affect Your Business?

It was recently announced that Massachusetts Governor Deval Patrick signed a law to steadily raise minimum wage over the next three years. The purpose is to make it so low-income workers can earn a better wage and reduce poverty levels throughout the state. After implementation, the minimum wage will be considerably higher than the proposed federal minimum wage of $10.10. Here are the details and what it means for your business.

Change in Massachusetts Minimum Wage

Although Massachusetts currently provides workers with a minimum wage of $8, which is higher than the federal minimum wage of only $7.25, it will gradually increase over time until it finally reaches $11 in 2017. According to the Boston Herald, “the first increase in the minimum wage, to $9 per hour, will take effect on Jan. 1. The hourly wage will bump up to $10 on Jan. 1, 2016 and to $11 on Jan. 1, 2017, which would be above any increase currently planned in other states.”

This change will also impact employees who earn tips, and instead of getting $2.63 an hour, they will receive $3.75 an hour by 2017. It’s projected that the new law will affect roughly 600,000 minimum wage workers and 200,000 tipped workers.

How this Affects Employers

This minimum wage spike obviously means that employers will be spending more to compensate employees. Whether this is a good thing or bad thing depends upon how you look at it. On one hand, it can decrease your employee turnover rate, which means you can achieve more stability and reduce your overall training costs. This can lead to better team chemistry when your business’s positions aren’t like revolving doors.

This can help you get the most from your employee resources, which can translate into increased productivity. An added benefit is that stronger team cohesion often results in higher quality products and services. That should have a positive impact on customer satisfaction where you’re more likely to have repeat sales and customer acquisition can happen more organically.

Another interesting point that proponents make is that a higher minimum wage could act as an economic stimulus. The logic is that when employees earn higher salaries, they are able to spend more. This ultimately means that small to mid-sized businesses could increase profits and strengthen the U.S. economy as a whole.

On the other hand, the increased minimum wage could make it so you’re not able to hire as many people, and you may be forced to let some workers go. You may also have to pay more for unskilled labor, such as high school workers. This could put a strain on operations and thwart the progress you’ve made at least for the short term.

The Big Picture

Whether this minimum wage increase is positive or negative really depends upon your viewpoint and your business’s specific circumstances. Regardless of your stance, it’s important to brace yourself for this change and figure out how your business will adapt. That way you can ease the transition and ensure that you remain compliant with state laws.