Connecticut may have to wait a few years to see the effects of minimum wage hikes, but that hasn’t kept business owners from worrying about what’s to come.
“I think businesses are still scrambling and still adjusting to the shock right now,” said Eric Gjede, vice president for government affairs for the Connecticut Businesses and Industry Association. “Right from the day it passed both chambers, we had businesses calling us asking, ‘what are they doing up there and how are we possibly going to be able to deal with this significant labor cost increase?’ ”
Connecticut joined New York, New Jersey and Massachusetts with newly passed legislation meant to boost the minimum wage to $15 an hour. Gov. Ned Lamont signed the law earlier last month, applauding efforts by lawmakers to bump up pay for working families in the state.
The first of five wage hikes is set to happen in October, increasing minimum wage from $10.10 to $11 an hour. Minimum wage will continue to increase by $1 each year until it hits $15 in June 2023.
On Jan. 1 of each year thereafter, the minimum wage will be adjusted by the percent change in the federal Employment Cost Index for all civilian workers’ salaries and wages for the one-year period ending on June 30 of the previous year.
Gjede called it “one of the most aggressive minimum wage hikes in Connecticut’s history.”
But local business owners said they see little on the positive side.
“I think it’s going to hurt more people than it’s going to help in the long run,” said Doug Wade, owner of Bridgeport-based Wade’s Dairy.
Wade said the incoming wage hikes won’t add any strain on his company because he already pays employees at least $15 an hour.
Other employers may not be so lucky, he said.
“In the short run, yes, people are going to get raises and the businesses are going to have to deal with it,” Wade said. “I think this is going to be damaging for the people it’s supposed to be helping.”
The effects won’t be immediate for a lot of business owners, however.
“We are hoping that it won’t have a big effect, but we will have to cross that bridge when we get to it,” said Jay Kiley, owner of Fairfield-based Synergy HomeCare, which provides in-home senior care across 14 towns in Fairfield County.
Kiley employs roughly 75 people who are already paid more than minimum wage.
While the earlier stages of wage increases won’t hurt his businesses, he said the cost of services may have to increase eventually so he won’t have to cut staff.
“It may put (the company’s services) out of reach for some clients,” Kiley said.
Larger companies may also be more inclined to incorporate new tech and digital platforms to cut costs or staff, according to Wade.
Chain brands such as McDonald’s are transforming thousands of restaurant locations nationwide, adding kiosks and other technology with a goal of fewer human workers and more self-service formats.
“(Automation) is going to be nothing that we can all sit back and say ‘well this wouldn’t have happened anyways,’ but it’s certainly going to accelerate the process,” Wade said.
In general, the complaints aren’t about this year’s increase but about what happens when the minimum wage starts drifting north of $12 or $13 an hour.
“It’s toward the end of that scale that it starts to have a negative effect, because you’re just baselining everything and you have no flexibility to bring people in with zero experience and let them earn up,” said Brad Hittle, CEO and co-founder of Two Roads Brewing Co. in Stratford.
One result of the hikes, he said, could mean elevating the expectations of people who’ve been with employers longer, which could either create conflict among staff or eat into the bottom line.
“You’re going to have the psychological battle four or five years from now and it’s going to really put pressure on payroll,” Hittle said.
Proponents of the minimum wage increases argue that the worries of business owners are unfounded.
“Our economy cannot sustain itself on people working poverty jobs,” said Lindsay Farrell, executive director of the Connecticut Working Families Party. “It’s unfair to them and it’s costly to the rest of us.”
The pay hike would help 332,000 state workers in Connecticut, Farrell said.
Contrary to employer concerns, a study conducted by the Center for Economic Policy Research found that businesses could adapt to the wage increases without cutting jobs with adjustments, including hour and benefit changes or increasing prices of products and services.
“Businesses complain about the math and how hard they think that will be for them, but what gets lost is that this is an issue about people’s lives and whether or not they can take care of themselves and their families.” Farrell said.
The increases could potentially pose problems for seasonal employment however, according to the Connecticut Conference of Municipalities.
“While conventional wisdom states that raising the minimum wage will help our most vulnerable populations, the dramatic rise in the minimum wage these bills propose over a short time period is most likely going to have the opposite effect by hurting those who can least afford it,” read a statement from the New Haven-based organization, which represents more than 100 cities and towns in the state.
According to the statement, wage hikes over the next few years would inflate costs associated with seasonal or part-time employees that could likely result in staffing reductions or the elimination of programming.
Anthony Calabrese, director of Fairfield’s Parks and Recreation Department, said municipalities have been watching the minimum wage debate and will have to plan accordingly.
“We’ve been talking about it for years,” he said “(Lawmakers) have been trying to go to $15 an hour for quite a while now so when we were budgeting years ago, we tried to get out ahead of the curve, so it wasn’t going to be such a big hit for us.”
He said Fairfield’s budget, which was approved in May, has already accounted for early changes, so they won’t have to worry about staffing cuts. As increases continue, Calabrese said officials will have to discuss any more needed budget changes.
“Definitely the goal is to try to have as little impact on the service side of things as possible,” he said. “We don’t really want to shut down beaches because we can’t staff them.”