In an article in CNBC, Steve Hall, LISC’s vice president of economic development lending, analyzes the challenges small business owners face amid inflation and wage hikes coming in 2024. Balancing bottom lines with attracting talent and paying living wages in a volatile economic landscape makes for "a very precarious situation that small businesses find themselves in,” Hall said.
The excerpt below was originally published by CNBC:
On Main Street, it’s time to prepare for the new state minimum wage hikes in 2024
By Cheryl Winokur Munk, CNBC
More wage hikes are coming across U.S. states in 2024 and many Main Street businesses may feel the pinch.
Not only are wages generally up from year-ago figures given the hot labor market, but minimum wage rates are rising in many states as a result of new laws. These can be a double-whammy to small businesses already dealing with inflationary pressures. At the same time, businesses know they need to pay more to attract top talent.
“It’s a very precarious situation that small businesses find themselves in,” said Steve Hall, vice president of economic development lending at the Local Initiatives Support Corporation, a community development financial institution.
Here are some of the biggest wage hikes set to impact Main Street in the coming year:
California fast-food workers
Beginning on April 1, 2024, California’s minimum wage for the state’s 500,000 fast-food workers will increase to $20 per hour. By comparison, the average hourly wage for fast-food workers in 2022 was $16.21, according to a state release announcing the change, which cites a 2022 research brief from The Shift Project think tank.
Companies like McDonald’s and Chipotle have already said they are likely to raise prices to counteract the impact of the new law.
Chipotle chief financial officer, Jack Hartung, told analysts on a company earnings call that the chain will likely raise prices in California by a “mid-to-high single-digit” percentage. And McDonald’s chief executive Chris Kempczinski told analysts he couldn’t pinpoint the exact amount, but price hikes were likely to ensue.
This targeted food sector increase is separate from California’s hike to its minimum wage, which is rising to $16 in 2024 from $15.50, a 3.2% climb. Some cities and counties in California have higher local minimums.
Other states where minimum wages are going up in 2024
Other states are raising the minimum wage, in part to attract workers to those areas of the country, Hall said.
Currently, 30 states and Washington, D.C., have minimum wages above the federal minimum wage of $7.25 per hour, according to the National Conference of State Legislatures. Even so, there’s a big disparity between minimum wage rates across the country, based on factors such as local cost of living.
Some states have set the bar significantly higher than the federal rate, and in many cases, levels are slated to rise in 2024 and beyond. Hawaii, for example, is set to raise its minimum wage to $14 in January, up 16.7% from the current $12 rate. Last year, the state set a plan for its minimum wage through 2028 when it will be $18 per hour. The state hiked its rate in 2022 for the first time since 2018 when the minimum wage rate was set at $10.10 per hour.
Nebraska’s rate is also going up in 2024 to $12 from $10.50, a 14.3% jump.
Maryland’s rate, for companies with 15 or more employees, will increase to $15 from $13.25, a 13% jump.
Delaware’s minimum wage is rising to $13.25 in 2024, up from its current level of $11.75, a 12.8% jump.