Minimum Wage Increases Could Result in Pay Raises, Layoffs, AI Adoption

The minimum wage has increased for workers in 25 states this year, potentially providing some workers with hope of a pay raise.  But while some hiring managers will respond by raising wages, a new survey shows that most employers will find other ways to manage their budgets that may not end with workers getting a pay raise.

More than a third of hiring managers would increase pay to their employees across the board if the minimum wage increases were to take effect, including workers at all pay levels, according to the results of a Express Employment Professionals-Harris Poll survey.

Most employers, however, would find other ways to navigate the higher pay requirements, including 31% who would turn to automation or artificial intelligence. Other hiring managers said they would take more forceful action, including 19% who would reduce their workforce and 17% who would either outsource more work or decrease the number of employee hours worked. 

The survey showed that hiring managers may have to deal with resistance from employees, as 58% of job seekers said they would quit a job if they found out entry-level workers’ pay was raised to the same levels as experienced staff.

Higher Wages Could Also Affect Prices

On July 1, Oregon became the latest state to increase its minimum wage, now set at $15.95 an hour.  The increase comes as Federal Reserve officials closely watch data on wages, which can provide insight into inflation trends since business owners often have to raise prices in order to issue bigger paychecks. 

The higher wage requirements in Oregon would likely affect businesses there, said Express Employment Professionals Portland franchise owner Sara Delafuente. 

“Some may experience higher operating costs, which could lead to price adjustments for their products or services,” she said. “However, there may also be positive outcomes, such as increased employee satisfaction and productivity and a boost in consumer spending power, which could benefit businesses in the long run.”

The most recent U.S. employment data showed that in June, wage gains were likely to outpace inflation, with average hourly wages increasing 3.9% over the same period last year, higher than the 3.1% annual change in prices that the Consumer Price Index (CPI) for June was likely to show.