Working out the Wages: Springfield employers feeling the weight of minimum wage hikes

Bob Belote: Minimum wage increases will add $1.3 million to payroll by fiscal 2024.

Francine Pratt: Living wage in Springfield is $12.50 an hour.

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Supporting the statewide minimum wage hike last November was a no-brainer for Bambino’s Cafe and B2 Cafe co-owner Andy Faucett.

“It was a very popular issue with the people who work at Bambino’s and the people who support Bambino’s,” he said. “I feel like you’re kind of putting money in the pocket of people who spend money.”

Faucett was one of 700 business owners across the state – 110 in the Springfield area – who signed on to join the Missouri Business for a Fair Minimum Wage coalition. Other local businesses that supported the stepped increase to a $12 minimum wage were O’Reilly Automotive Inc., The Coffee Ethic LLC and Mostly Serious LLC.

Most of Faucett’s roughly 60 employees already were earning $10-$12 an hour, higher than the state’s previous $7.85 hourly minimum. But the minimum wage statue requires tipped employees to earn at least 50% of the minimum wage in base pay, which resulted in a bump of 40 cents an hour for all the cafe servers. Faucett said the move is expected to increase payroll costs by roughly 5% this year.

“There could be some discomfort,” he said of the increased personnel costs. “Business owners are pretty good as long as they have to play by the same rules.”

Before wages were driven up by legislation, he said a tight labor market the last three years and the success of his eateries – on track for $2.4 million in revenue this year – already was dictating pay.

“The market wage has been above what the minimum wage has been. It had been hard, prior to the increase, for me to start people at even $8 an hour,” Faucett said. “That’s why I wasn’t too concerned about this initial pay increase.”

Approved by 62% of Missouri voters in November 2018, Proposition B increased the state minimum wage in increments of 85 cents per hour through 2023. The state’s first bump went into effect Jan. 1 to $8.60 an hour.

A report by the Washington, D.C.-based think tank Economic Policy Institute found Missouri workers will gain $66.3 million this year in additional pay, with the average full-time worker’s annual pay rising by $620.

Bob Belote, director of the Springfield-Greene County Park Board, said the wage hike is having a big impact on the organization, which currently employs 660 seasonal and part-time workers and 270 full-time staff.

“We’re the biggest part-time and seasonal employer within the city, so the hit to us is the most dramatic,” he said. “It’s an understatement to say it’s significant.”

The minimum wage hike will increase personnel costs by $272,013 in the current fiscal year, a roughly 2% increase to bring total payroll expenses to$19.9 million, according to budget documents provided by the Park Board. By fiscal 2024, when the minimum reaches $12 an hour, increased payroll costs associated with the change will be $1.3 million, a roughly 6% jump in total payroll from 2019.

As a public entity, the Park Board could have opted out of the minimum wage hike, according to the legislation. But Belote said the organization needed to stay on par with private businesses to attract workers.

“The services we provide are incredibly important to the community,” he said. “We want to pay those folks and our workers who are doing those services for us the best wage we possibly can. I always want us to be a good employer so when kids and youth and retirees and part-time eligible folks have a chance to make a choice for their employment, they’re choosing us.”

Ahead of last year’s vote, both the Springfield Area Chamber of Commerce and the Missouri Chamber of Commerce and Industry opposed the minimum wage increase. Sandy Howard, vice president of public affairs, said the local chamber continues to oppose increases to the minimum wage.

“The chamber’s 2019 state legislative agenda opposes further increases to Missouri’s minimum wage,” she said via email. “Traditionally, the chamber has taken the position that Missouri is at a competitive disadvantage in attracting businesses and jobs when the state’s minimum wage rate is higher than the federal rate.”

Missouri’s current minimum wage is higher than six of its neighboring states as well as the federal wage, currently at $7.25 an hour. But there is a push at the federal level to more than double that wage. The House of Representatives voted 231-199 on July 18 to increase the federal minimum wage to $15 an hour by 2024. The bill is headed to the Senate, but it’s not expected to advance in the Republican-led chamber. Democratic presidential hopefuls, such as Sen. Bernie Sanders, have included such hikes in their campaign platforms.

According to the U.S. Bureau of Labor Statistics, Springfield’s average wages are $15.89 an hour. And 28% of its 206,070 workers make below what Prosper Springfield Director Francine Pratt calls a “living wage.”

“What we mean by that is that someone making at least $12.50 an hour, they are able to take care of their basic needs without public assistance and save at least $500 a year in case of emergency,” she said.

Pratt is a champion for a living wage as part of Prosper Springfield’s mission to decrease the local poverty rate by 5 percentage points and secure 60% postsecondary attainment by 2025. But as a former business owner, she said she understands the struggle of payroll increases. That’s why she supports increasing access to education for employees to grow their skills.

“They can develop the skills that help them achieve those higher-paying jobs,” she said. “We believe there is a collective way where we can move that scale where everybody benefits.”

In Springfield Business Journal’s first Economic Growth Survey this year, 46% of the local business owner and executive respondents expect price increases on products and services as a result of the minimum wage hike. Faucett said Bambino’s increased prices last year, so he is holding off for now. 

Belote said the Park Board is saving systemwide fee increases and personnel cuts as a last resort to balance the budget. The organization’s funding committee is researching how to absorb the future wage increases through new funding streams, donations and increasing efficiencies. This will be the first fiscal year the organization has paid for the increase, as Belote said the city of Springfield subsidized the $72,153 in costs due to the minimum wage increase in fiscal 2019, which ended June 30.

Both Belote and Faucett cite wage compression as another challenge. As the lowest-earning employers’ wages are lifted, the organizations are re-evaluating wages for higher earners.

“As you raise the floor, then you lower the ceiling,” Faucett said.

He’s combatting that by shifting his view of payroll.

“I started to look at payroll as less of an expense and more of an investment,” he said. “We went from one location that did $300,000-$400,000 in annual sales to two locations that will probably do $2.3-$2.4 million this year. You can’t really do that while being overly payroll conscious.”

Belote said his funding team has ramped up efforts to raise revenue. Although the minimum wage hike is proving a significant stress on the budget, he supports it: “The goal is to lift everybody up, to be a competitive employer, to be a good employer and to pay decent living wages.”