By Brittney Hall

Although advocates for an increased minimum wage have seen results recently, states are increasingly using preemption to bypass the advocates’ advances.[1] Preemption “refers to situations in which a law passed by a higher government authority supersedes a lower one.”[2] Minimum wage standards affect the economy by impacting productivity in businesses and improving low-wage earning employees’ purchasing power.[3] However, small businesses fear raising the minimum wage requirement would harm their profits and slow their efforts to hire more employees.[4] Since the minimum wage requirement can be set at multiple levels of government and affects various communities separately, the debate of how much the minimum wage should be increased is complicated, especially from varying results and factors (such as effects in employee turnover and productivity, payroll costs, and business profits) that determine the increased minimum wage’s effect on the business, and therefore economy.[5]

The United States created the minimum wage requirement through the Fair Labor Standards Act of 1938 in response to employers taking advantage of desperate people seeking work during the Great Depression by paying those workers very little.[6] In 2009, the federal government increased the minimum wage requirement to $7.25, which considering inflation is equal to the minimum wage in the 1950s.[7] Although the minimum wage has increased, it has not increased as much as the cost of living, particularly rent prices.[8] The federal government is currently debating on a higher federal minimum wage requirement in an effort to reduce poverty.[9] Although there are multiple advocates, “not all agree on the impacts of a rising minimum wage, and results of an increase could vary dramatically based on location, industry and amount of wage boost.”[10] In an effort to advance the efforts of minimum wage increases more efficiently, advocates have targeted their efforts on states and cities.[11]

Advocates of a higher minimum wage argue that it would decrease poverty, increase purchasing power, reduce the use of public assistance, and improve employment opportunities for low-wage workers.[12] However, businesses tend to oppose the increase in the minimum wage because “few things hit business owners in the pocketbook harder than the wages they pay their employees.”[13] Therefore, small businesses fear wage increases could harm their plans to hire more workers and decrease their profits.[14] However, a potential benefit for increasing the minimum wage is a higher opportunity for the business to invest in their employees because employees would have a bigger incentive to stay at their jobs.[15]  For example, the restaurant industry opposes raising minimum wage, claiming that raising the minimum wage could force them out of business.[16] However, “Survival of the Fittest,” a recent working paper by Michael Luca of Harvard Business School and Dara Lee Luca of Methematica Policy Research, observed the closures of restaurants in various communities and determined that minimum wage did not force restaurants out of business that were rated above a 3.5 on Yelp.[17] The study thus which indicates restaurants are mainly affected by the minimum wage increase if they were already failing before the increase is implemented due to other factors, such as competition and rent.[18]

Although the effects of minimum wages are difficult to calculate, the consensus among cities and states is to increase the minimum wage.[19]  According to the Economic Policy Institute, “currently 29 states have a minimum wage above the federal standard, and 24 cities and counties have minimums above state levels.”[20] However, some of the cities that voted to increase the minimum wage for their participants have been preempted by that state.[21] For example, the “Missouri state legislature passed a preemption law that prohibits cities from establishing a minimum wage higher than the state’s” (which is now $7.70) in order to bypass enforcing the St. Louis ordinance to raise minimum wages to $10 in an effort to raise family incomes and lower the inequality of the city’s people.[22] Such a preemption has a potential problem of targeting certain classes of people who make up the majority of low-wage workers, such as women and people of color.[23] Additionally, low-wage earners are no longer teenagers, but educated, productive adults who are trying to support their families because it is more difficult to get better-paying jobs.[24]  Since a local government’s purpose of increasing its minimum wage requirement is to benefit its community and residents, the state should not be able to preempt their movement to a better society by making the local government abide by a lower minimum wage requirement set by the state.

[1] JoEllen Chernow, States Use a Troubling ‘Tool’ To Roll Back Minimum Wage Gains, CNBC (Oct. 20, 2017, 1:42 PM), https://www.cnbc.com/2017/10/20/fight-for-15-hits-preemption-roadblock-commentary.html.

[2] Marni von Wilpert, City Governments Are Raising Standard For Working People – and State Legislators Are Lowering Them Back Down, Economic Policy Institute (Aug. 26, 2017), https://www.epi.org/publication/city-governments-are-raising-standards-for-working-people-and-state-legislators-are-lowering-them-back-down/.

[3] Lauren Dixon, How Does the Minimum Wage Impact the Economy?, Talent Economy (June 14, 2017), https://www.talenteconomy.io/2017/06/14/minimum-wage-impact-economy/.

[4] Jeremy Quittner, What a Minimum Wage Hike Would Really Mean for Small Businesses, Inc. (May 4, 2016), https://www.inc.com/jeremy-quittner/small-business-week-minimum-wage.html.

[5] Dixon, supra note 3.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Amanda Hoover, Minimum Wage for 4 Million Workers Will Go Up in 19 States in 2017, Business Insider (Dec. 30, 2016, 8:28 PM), https://www.businessinsider.com/minimum-wage-for-4-million-workers-will-go-up-in-19-states-in-2017-2016-12.

[12] Equitable Growth, The Importance of Raising the Minimum Wage to Boost Broad-Based U.S. Economic Growth, Washington Center for Equitable growth (May 10, 2017), https://equitablegrowth.org/research-analysis/the-importance-of-raising-the-minimum-wage-to-boost-broad-based-u-s-economic-growth/.

[13] Quittner, supra note 4.

[14] Id.

[15] Id.

[16] Michael Hiltzik, Minimum Wage Increases Can Kill Businesses – If They Already Stink, Los Angeles Times (May 19, 2017, 11:15 AM), https://www.latimes.com/business/hiltzik/la-fi-hiltzik-minimum-20170519-story.html.

[17] Id.

[18] Id.

[19] Wilpert, supra note 2 (noting Missouri state legislature’s response to a St. Louis ordinance to raise the city’s minimum way by prohibiting its cities from establishing a minimum wage higher than the state’s).

[20] Quittner, supra note 4; Wilpert, supra note 2 (noting “in the last year and a half alone, 15 states have passed 28 laws preempting local labor standards.”)

[21] Chernow, supra note 1.

[22] Wilpert, supra note 2.

[23] Chernow, supra note 1.

[24] Quittner, supra note 4; Hoover, supra note 11; Hiltzik, supra note 16.