Winners and losers: Minimum wage increases July 1

Come July 1, the minimum wage in Nevada will be $12 an hour, a modest bump from the current minimum wage in the state but an increase nonetheless that could affect businesses, workers and the economy.

In 2022, voters supported the initiative in the form of a ballot question amending the Nevada Constitution to replace the previous two-tier system in which employers who offered health insurance benefits under certain conditions could pay $1 less in hourly wages than those who did not. It also replaced previous provisions for cost-of-living adjustments, which were capped at 3 percent per year.

The tiered system had seen small increases in the minimum wage since 2019 legislation. Without the ballot question, the minimum wage would have reached $12 an hour for those employers without health benefits and $11 for those employers with specified health benefits.

Now, it will be $12 an hour across the board with a corresponding increase in overtime rates for nonexempt employees. The current federal minimum wage of $7.25 per hour was set in 2009, according to the U.S. Department of Labor.

“In cases where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages,” the DOL says.

Nevada’s ballot measure also took into account the federal wage:

“However, this ballot measure provides that if, at any time, the federal minimum wage is greater than $12 per hour worked, the state’s minimum wage is increased to the amount established for the federal minimum wage, unless the Legislature establishes, by state statute, a minimum wage that is greater than the federal minimum wage as permitted by federal law.”

Statewide, the ballot question passed by a double-digit margin, with 545,828 supporting it, or about 55 percent. In Carson City, however, 54 percent of the electorate voted against it (12,512 votes), according to the Nevada Secretary of State’s Office.

“The reality is that most businesses have exceeded the $12 per hour minimum wage to attract and retain employees, thus this raise may not make a noticeable impact,” said Carson City Chamber of Commerce Executive Director Ronni Hannaman. “As with any wage increases, the actual cost of goods and services is passed on to the consumer thereby increasing inflation. Since COVID, wages have become a supply and demand issue thus raising the cost of doing business.”

Hannaman said she had received no complaints from member businesses about the minimum wage increase, but she pointed to “wage push inflation,” which Investopedia defines as “an overall rise in the cost of goods that results from a rise in wages.”

“It stands to reason that as workers’ wages rise, so does the cost of doing business since employee raises go up to the supply chain. Businesses must pass on the increases to stay in business,” she said, giving the examples of rising insurance and housing costs.

“In the housing industry, when supplies go up and labor go up, guess what? So does the housing cost,” she continued. “Businesses can only absorb just so much and have overhead costs to be considered.”

Hannaman called the current labor market an “employee market,” noting local Walmarts offering around $15-$20 an hour for store workers.

“Bottom line is that they are not paying $12 per hour — and neither are many businesses of which I am aware. This is still an employee market and business will pay the price if needed,” she said.

Hannaman added the minimum wage “was once a training wage, and it was up to the worker to show their worth to go on to the next level” and that “earning higher pay was an incentive for the worker.”

“Once upon a time, having a college degree was said to boost your entry payrate,” she said. “For many, those then-minimum wage jobs got them through college. Now, it’s knowing a specific skill that can allow earning a higher pay than a college graduate. Indeed, labor markets are not perfect, just as the housing market is not perfect. Much is dependent on an area and how much unemployment there is. In low unemployment, the wages increase to attract workers; in a high unemployment market, a worker is happy with minimum wage if work is the priority.”

According to the Nevada Department of Employment, Training and Rehabilitation, the unemployment rate in Carson City was 4.6 percent in April with a labor force of 26,040 and 1,194 unemployed individuals.

Elliott Parker, professor and chair of economics at UNR’s College of Business, provided the Appeal data showing both the federal and state minimum wages lagging behind labor productivity and median wages.

Referring to data adjusted for inflation in 2023 dollars (pictured above), he said, “You can see that the federal minimum has not kept up with inflation, and Nevada’s higher minimum brings us in line with where we were back in 1979. Neither has kept pace with the median wage or productivity. In 1979, the minimum wage was 46% of the national median wage. In 2023, the federal minimum was down to 25% of the median, and Nevada’s minimum wage was 36% of the national median.”

Parker said virtually every economic change “creates winners and losers.”

“The vast majority of workers earn more than the minimum wage, and only those at or close to the minimum are likely to see wages increase,” he said. “Those particular workers will have more to spend, while their employers may have less. Some low-productivity workers may lose their jobs,” he said. “Why is there any disagreement on this? Part of it depends on how you imagine markets work. In a perfectly competitive labor market in which employers and workers have full information, a minimum wage would cause low-skilled workers to lose their jobs.

“But if markets aren’t perfect, then employers may pay workers less than what their labor is worth, and a higher minimum wage reduces that problem. Wages also affect worker motivation, and more productive workers can help offset the costs of a higher wage. However, it is a bit of a what we call a coordination game, so that what makes sense for one employer depends on what their competitors are doing.”

Most research on minimum wage increases, Parker said, “find little to no effect on overall employment for low-income workers, but that only applies to the relatively small changes that have been studied.”

“A dramatic increase like a doubling of wages would almost certainly lead to a dramatic increase in unemployment, but that is not what we are talking about here,” he said.

Parker stressed small changes can have greater impact on rural areas. He gave the example of Baker, a small town in eastern Nevada near Great Basin National Park.

“In a place like Baker, and other small towns in rural Nevada, the higher minimum wage may have outsized effects, especially for small restaurants and shops barely scraping by. Similarly, there will be some teenagers who will have a tougher time getting their first job, and building up the experience that will help them get better jobs in the future,” he said. “This is true even if the minimum wage adjusted for inflation used to be higher (i.e., the federal minimum wage in 1968 was equivalent to $14.30, in 2023 dollars, and the average from 1970-80 was equivalent to $12.25). Just because I expect the gains from a higher minimum wage in our state will likely exceed the losses, I don’t mean to be dismissive of those losses. Law can sometimes be a very blunt instrument.”

Those gains? Parker said the gains include “an improvement in the ability of low-income workers to pay for rent or childcare, a slight decrease in income inequality, and an increase in worker productivity resulting from better-motivated workers.”

“Nevada has a relatively high number of service workers who don’t earn very much, and relatively high rents, and this matters to them,” he said.

“Surely, in my personal point of view, the rural areas will benefit greater because of the minimum wage increase, but overall, you’re still talking about putting food on the table… families,” said Carson City resident Cedric Williams.

Williams is Family Services Specialist II for the Nevada Division of Welfare and Supportive Services. He said he’s the guy handling food stamps, medical benefits and cash aid. He’s also the president of the American Federation of State County Municipal Employees, Local 4041, Sierra Range.

Williams worried about the high costs of living in the area and acknowledged minimum wages haven’t kept up with those costs. He said while the new state increase isn’t much, it can lead to families saving more, including for their kids’ college education. It can pay for food, clothes and “a date night for a change, being able to afford one,” he said.

“It takes all of us working together regardless of the political side of the fence we sit on to make this happen,” he said.