Ohio minimum wage workers get large pay raise, but will it make a difference?

Ohio’s minimum wage on Sunday saw the largest increase in more than a decade and a half when it was adjusted in response to sky-high inflation.

About 188,000 Ohioans will see direct wage gains while about 275,000 other workers across the state are likely to see bigger paychecks as employers adjust their pay scales, says Policy Matters Ohio, citing estimates from the Economic Policy Institute.

“While those new pay scales won’t push up workers’ buying power, they serve as a vital safeguard against inflation, which hit a 40-year high this year,” said Michael Shields, a researcher with the liberal-leaning organization.

Some business groups say raising the minimum wage probably won’t have a major impact, since employers already were increasing pay to try to attract workers during a strong labor market in which job openings have exceeded the number of unemployed job-seekers.

On Sunday, Jan. 1, Ohio’s minimum wage increased by 80 cents to $10.10 per hour from $9.30 cents per hour.

This 8.6% increase is in the minimum wage is for non-tipped workers.

Tipped workers, like waiters and waitresses in restaurants, will see their minimum wage increase to $5.05 per hour, from $4.65.

The state’s minimum wage increased about four times between 1969 and 2006.

In 2006, Ohio voters approved an amendment to the state constitution that significantly increased the state’s minimum wage and indexed the legally mandated base pay to inflation to ensure it would increase to keep up with rising costs.

Since the measure passed, the state’s minimum wage has increased about 13 times, in line with inflation, according to data from the U.S. Department of Labor.

The 80-cent increase that took effect Sunday is the largest inflation adjustment on record, since the constitutional amendment passed. It follows the highest levels of inflation in decades.

Minimum wage workers

Policy Matters Ohio says about 188,000 workers in the state currently earn less than $10.10 per hour, and their wages will go up. Also, about 278,000 Ohioans who earn a little more than that also should see their wages increase.

About two-thirds of the workers who are expected to be impacted are age 20 or older, said Policy Matters Ohio, and more than 355,000 children live in households that should benefit from the change.

Minimum-wage workers tend to be young, and part-time workers are much more likely than full-time workers to receive bare-minimum pay, according to the U.S. Bureau of Labor Statistics.

Across the country, the leisure and hospitality industry accounts for a significant share of lower-wage jobs.

About 120,000 Ohioans have fast food and counter worker jobs, and the median pay is about $10.70 per hour — which means half of these workers earned less than that amount, according to the Bureau of Labor Statistics’ May 2021 state occupational employment and wage estimates.

Nearly 65,000 Ohioans also work as waiters and waitresses; 22,000 are bartenders; 11,700 have jobs as hosts or hostesses at restaurants, lounges or coffee shops; and 10,500 work at amusement parks and recreational establishments.

These occupations have median wages below $10.60 per hour. But some of these jobs are tipped positions.

The restaurant and food-service industry has seen rapid wage increases, especially since the start of the pandemic, said John Barker, president and CEO of the Ohio Restaurant Association.

During the COVID crisis, many restaurants, fast-food establishments and other types of businesses have struggled to fill jobs and hold onto workers.

Many businesses have increased starting pay to try to boost interest in their job openings.

Brown Street by the University of Dayton has a string of fast-food establishments and chain restaurants and many are looking for workers.

Stores that have “help wanted” or “now hiring” signs posted on or outside their doors include Taco Bell, Burger King, Hot Head Burritos, Subway, Starbucks, Panera Bread, Chipotle, Bibibop, Fusion, Penn Station, Skyline Chili and Five Guys.

Chipotle’s sign says jobs start at $13 per hour and there are cash bonuses.

Bibibop’s sign says employees can earn $11 to $18 per hour, plus there are referral bonuses.

Data the Ohio Restaurant Association tracks indicate that less than 5% of the 585,000 Ohioans employed in the food service and restaurant industry earn the state’s minimum wage, Barker said.

Barker said most of these workers are high school- or college-aged and they primarily work part-time.

“The market is doing an efficient job raising wages and the state minimum wage is not an issue we hear much about from members,” Barker said. “They are already paying — on average — above the minimum wage.”

Paying more

The NFIB represents more than 21,000 small businesses in Ohio — including retailers, lawyers, manufacturers, accountants and farmers — and most have fewer than 20 employees.

Some of the business association’s members pay the state minimum wage, but often that’s because they hire inexperienced workers, said Roger Geiger, NFIB’s Ohio executive director.

NFIB believes in the free market system and agrees with entrepreneurs who think the market should set the wages they pay, Geiger said.

A recent survey found that half of NFIB members increased wages in the prior three months and the same share of members plan to increase wages in the next three months, he said.

Geiger said the impact of the minimum wage increase is likely minimal, but businesses may have to raise prices as a result of higher staffing costs, compounding inflationary issues.

A higher wage

Some research groups say that raising the state or federal minimum wage increases economic activity and reduces the need for assistance from safety-net programs.

They claim that many businesses pay “poverty wages” and taxpayers end up paying subsidies to ensure that low-wage workers have enough income to live on.

Shields said Ohio needs a much higher minimum wage — such as $15 per hour — because its workers have been more productive and created more wealth than ever before.

He said unfortunately a small share of wealthy Ohioans have primarily benefitted from these gains, while lower-wage workers have seen minor wage improvements.

But groups like the conservative-leaning Buckeye Institute say a $15 minimum wage would likely result in more than 115,000 Ohioans losing their jobs because business owners would either have to find ways to cut expenses or close down in light of higher payroll costs.

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