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How Local Minimum Wage Laws Impact Site Selection Decisions


Companies making location decisions must consider not only federal employment regulations, but also a host of state, provincial and local laws. This article, the third in our employment law series, examines the importance of various minimum wage laws to corporate location decisions. 

First, a bit of history on the subject. The concept of a minimum wage was initially introduced by the state of Victoria, Australia, in 1896, then adopted in the United States when Massachusetts passed the first state minimum wage regulations in 1912. Several other states and Canadian provinces shortly followed suit, but it wasn’t until the 1930’s that the U.S. government established the first national minimum wage. Canada, on the other hand, does not have a federal minimum wage, except in the case of a few regulated “national” industries.

More than one hundred years after their first adoption in North America, minimum wage laws remain a hot topic among policymakers, legislators and employers. Here’s what companies contemplating location decisions need to know:

United States

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The federal minimum wage has remained at $7.25 per hour since 2009, though recent years have witnessed growing pressure to boost this rate to $15 an hour (known as the “Fight for $15”). While the Democrat-controlled U.S. House of Representatives passed a bill to increase the federal minimum wage to $15 per hour earlier this year, the Republican-controlled Senate is unlikely to follow suit (and it’s even less likely that President Trump would sign such legislation if it did advance). That could all change in 2020, should Democrats re-capture the Senate and the presidency.

While 21 states continue to adhere to the federal minimum wage, more than half have chosen to exceed the $7.25 federal standard, some by a significant margin. For example, the District of Columbia currently has the highest minimum hourly wage ($14.00), and it, along with N.Y., Conn., Calif., Mass., Ill., Md., and N.J., will be moving to $15.00 within the next six years.

Some cities and counties are acting as well. Forty-four localities have enacted minimum wages that exceed their state thresholds. Other states, including Missouri, are preventing minimum wage hikes by passing laws preventing local governments from adopting their own minimum wage ordinances. 

Today over 90% of countries have some sort of minimum wage law in place.

 Canada

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Among the Canadian provinces, the minimum wage ranges from C$11.32 in Saskatchewan to a high of C$15.00 per hour in Alberta, its neighbor to the west. Despite the lack of a federal minimum wage, there has been a push across Canada for a C$15 minimum in all provinces. And, as in the U.S., several Canadian provinces have begun to raise their rates significantly.

Implications for Location Selection

For companies considering an expansion or relocation, how much do minimum wage rates matter? Here are a few takeaways:

  • The impact of minimum wage requirements may extend beyond obvious projects and industries. A tech start-up is unlikely to hire many (if any) positions at the minimum wage level, while companies in industries such as retail and hospitality often staff lower-skilled positions at the minimum wage threshold. That said, by raising the minimum wage, state and local jurisdictions are likely to increase the wage “floor” for other higher-level jobs—impacting a range of industries.
  • The relevance of minimum wage requirements increases when variations exist within the same market. In instances where political boundaries bisect a metropolitan area, “artificial” anomalies—including differing minimum wage standards—can impact location decisions. For example, economic developers in Illinois metros near state lines may find themselves at a disadvantage when the state’s minimum wage climbs to $15 in next few years, should adjacent Iowa, Indiana, Wisconsin and Kentucky remain aligned with the much lower federal minimum wage. 
  •  Minimum wage laws are often irrelevant to companies that have set their own “living wage” standards. An increasing number of companies—including Bank of America, Amazon/Whole Foods and Facebook—have embraced the concept of a living wage and have self-imposed minimum compensation levels beyond what is legally required. When government-mandated minimum wages are below those set by individual corporations, such laws will have a diminished impact on those companies’ location decisions.

Tracey Hyatt Bosman is a Managing Director at Biggins Lacy Shapiro & Co., one of the largest, most highly regarded site selection and incentives advisory firms in North America. BLS & Co. helps manage the complexities associated with finding optimal locations and securing incentives to support new ventures. Connect with Tracey on LinkedIn or email her directly at TBosman@BLSStrategies.com.

This is the third installment in BLS & Co.’s employment law series; read Part I and Part II here. Stay tuned for Part IV of the series, where we will cover gender and racial pay equity, benefits regulations and more. www.BLSstrategies.com.


Published: 10/8/2019
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