On August 28th, 2017, many minimum wage workers that saw a wage increase back in May will see that increase revoked. The state government of Missouri passed a law barring municipalities from raising the minimum wage above the state’s rate.
When the state’s rate goes into effect, employers are at liberty to reverse the increases employees got in St. Louis due to the local law. The city’s new minimum wage will revert to $7.70 per hour. That’s a $2.30, or 23%, pay cut for employees.
Who Is Affected?
Not all businesses will slash the rates of their low wage workers by 23%, however. Pay cuts that large can damage morale, which can hurt the productivity of workers. But in some industries, where the turnover rate is high, workers will definitely see a sharp decrease in their wages.
Such a large increase in the minimum wage, like the one seen in St. Louis in May, can serve to change worker’s living situations and spending habits. For example, employees who could not afford to live in the city of St. Louis previously may have moved into the city since they were getting a bigger paycheck. They may have bought cars, or moved into higher quality living arrangements. The new change in their pay rate will undoubtedly inconvenience many workers and set many of them into hardship.
Employers will find they have some extra cash to spend on their businesses or hiring more employees.
Half of the States Ban City Wage Increases
While the Federal minimum wage hasn’t changed in a decade, despite the growth in our economy, many states and cities have taken it into their own hands to raise the minimum wage. This is good news for employees in states and cities with a higher cost of living. Sometimes, though, states ban their cities from making minimum wage increases in a process called preemption. And, believe it or not, this happens pretty frequently.
Activists around the country have been fighting to increase worker’s wages for years, but half of the states have thwarted their efforts by passing laws that require cities to abide by state minimum wages. Cities in these states can no longer set their own rates based on cost of living differences in an attempt to offer its people a living wage.
This doesn’t mean that employers can’t pay their employees more, of course, but that the cities can’t require it.
As of this writing, these are the states currently with minimum wage preemption laws:
- New Hampshire
- North Carolina
- Rode Island
- South Carolina
Is Preemption a Good Idea?
“Preemption is the use of state law to nullify a municipal ordinance or authority. In some cases, preemption can lead to improved policy statewide. However, preemption that prevents cities from expanding rights, building stronger economies, and promoting innovation can be counterproductive when decision-making is divorced from the core wants and needs of community members.” – National League of Cities
The challenge in Missouri likely comes down to differing political views at the state and city levels. The state is Republican, which tends to favor employers over employees. The city of St. Louis is Democratic and joins in the fight to Raise the Wage.
Unfortunately for St. Louis, cities are essentially a creation of the state and subject to preemption, so when the state disagrees with some laws passed in its cities, the state can preempt that law.
The potential problem with preemption is that city lawmakers are more familiar with the needs of the people in their community. They are not tied up with the day to day issues that state lawmakers have to deal with. And so they have the time and willingness to tackle their city’s problems and they know what their people want, arguably better than state lawmakers do.
You can read more about preemption here.