Business & Tech

Some employers are raising the minimum wage to $15 — four years early

Melanie Warner left works on her hair cutting techniques with educator/stylist Alex Paulsen at Salon Herdis in Northampton, Mass. The owner of Salon Herdis is pre-emptively raising the wages of entry-level employees.
Steven G. Smith
Melanie Warner left works on her hair cutting techniques with educator/stylist Alex Paulsen at Salon Herdis in Northampton, Mass. The owner of Salon Herdis is pre-emptively raising the wages of entry-level employees.

At Salon Herdis in Northampton, the employees are getting a special New Year’s bonus: a minimum wage increase to $15 an hour, up from $11.

With the sizable jump, new owner Tim Fisk is taking a bold step. He is skipping past the new $12 state minimum wage, which takes effect Jan. 1, and going straight to the amount that will be required in 2023.

Fisk is raising prices on everything from haircuts to highlights to offset the increase, but he admits he’s nervous.

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“Did I do the math right, number one?” he said. “Are my clients going to get out of this what I’m hoping they get out of it, or am I going to lose clientele? Is this, in the second year of business, a dangerous thing to try?”

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Many Massachusetts employers have denounced the increase to $15, which follows on the heels of a phased-in hike to $11 from $8. Business owners say it will lead to staff cuts, higher prices, or possibly even closings.

The Dedham-based parent company of Papa Gino’s pizzerias and D’Angelo sandwich shops cited the rising minimum wage when it filed for bankruptcy protection in November and shut nearly 100 restaurants.

But other employers are forging ahead. Some are raising prices to compensate for the added payroll costs, while others are counting on reduced turnover and higher productivity to make up the difference.

Regardless, they are confident the higher wage will benefit their businesses. Going to $15 before the competition does will help attract and retain workers in a historically tight labor market, these businesses say. And they believe that paying a living wage, or closer to it, is simply the right thing to do — so why wait?

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At Salon Herdis, Fisk estimates the raises will cost about $40,000 a year, which he’s hoping to recoup by bumping up prices by $1 to $5 per service — a calculation he admits is “half science and half art.” Being in progressive Northampton helps, he said: “It’ll feel good to our clients to know that we’re making this big leap and we’re trailblazing on wages.”

Kate Crowther, a cannabis industry consultant, doesn’t mind paying more for her cut, color, and wax if it means the employees have a better quality of life. The change makes her feel more loyal to the salon, and more likely to refer friends.

“It’s not just a service that I’m provided, it’s the environment that they’ve created, from top down and bottom up, how they treat each other,” she said. “When people feel secure, they’re better able to do their jobs.”

Hannah Powers works on the front desk (phone) while general manager, Rose Coitrone looks on at Salon Herdis in Northampton, Mass. The owner of Salon Herdis is pre-emptively raising the wages of entry-level employees. Photo by Steven G. Smith LOID: 8.4.4185549818 Item Name: 31minimumwage(2) Content Folder: Business Photo by Steven G. Smith contact cell 970 618 5584 email steve@stevengsmith.com
Steven G. Smith
Hannah Powers (on the phone) worked on the front desk while general manager, Rose Coitrone looks on at Salon Herdis in Northampton, Mass.

But increasing labor costs has also been shown to have negative repercussions.

Several studies have found that minimum-wage increases have cut into teen employment and made it more difficult for people to get into the labor market. The conservative-leaning Employment Policies Institute estimates that California could lose more than 400,000 jobs by 2022, when the $15 minimum wage is in place.

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In Massachusetts, many business owners are worried about how they will pay their workers more, on top of new mandates for paid family leave and paid sick time and rising health care and energy costs.

Christopher Carlozzi, head of the Massachusetts arm of the National Federation of Independent Business, said he is “seeing a lot of fear” among small-business owners. “They’re just wondering how they’re going to survive as a small mom-and-pop business,” he said.

Still, stacks of studies have found that when the minimum wage rises in reasonable increments, there is little to no effect on employment. During the march from $8 to $11 an hour that took place in Massachusetts between 2014 and 2017, the number of retail and food-service employees in the state rose at a higher rate than in almost every other New England state, according to Department of Labor data analyzed by the left-leaning Massachusetts Budget and Policy Center.

The push for a $15 minimum wage started in 2012 with the Fight for $15 campaign, led by fast-food workers in New York. It quickly spread across industries and led to ballot initiatives and legislative efforts around the country. Earlier this year, Massachusetts became the third state to authorize a statewide $15-an-hour minimum wage, after California and New York, and Washington, D.C.

Massachusetts is one of 20 states raising its minimum wage Jan. 1. At $12, it will be the highest in the nation, along with California’s and Washington state’s. In Massachusetts, the minimum will go up gradually every year until it hits $15 in 2023. Meantime, the federal minimum, still in place in 21 states, remains at $7.25.

Employers are also forging ahead on their own. Amazon, Target, and several major banks, including Santander, recently announced that they’ll pay a $15 minimum wage.

In Massachusetts, more than 300 businesses have publicly stated their support for the $15 minimum, as part of the Business for a Fair Minimum Wage coalition.

Some of them have already raised wages to $15 or are planning to do that well before state law requires it,including a pickle maker in Greenfield and a biopharmaceutical recruiting firm in Quincy.

Community Builders, a nonprofit developer of affordable and mixed-income housing, started raising its minimum wage in 2016 and hit $15 in May. The Boston developer has 500 employees — half of whom are in Massachusetts — and is absorbing the cost of bumping up the paychecks of 16 percent of its full-time staff around the country. It anticipates the boost will allow employees to better focus on work instead of worrying about how to make ends meet, which should lead to more productivity and maybe even less overtime.

“If there’s a payoff, it is in terms of motivation, loyalty, and ability of staff to pay their own bills,” said chief executive Bart Mitchell.

At International Cars Ltd., an employee-owned dealership with a flagship location in Danvers and four others in New Hampshire, the $15 minimum wage has become a powerful marketing tool as the company seeks to open new dealerships and show that it can attract and retain high-quality workers.

The minimum wage at the company — which jumped from $13.50 to $15 in February, boosting the pay of 61 of its 270 employees and adding $200,000 a year to the payroll — is also leading more employees to refer friends and relatives for jobs, said Stephen Bouchie, the service director at Honda North in Danvers. Most of his 12-person express tech team, which performs oil changes and other maintenance, was brought in by current workers following the pay hike, creating a strong sense of camaraderie.

Turnover is also dropping, which reduces the costs of hiring and training new employees and inspires loyalty from customers, who like seeing the same faces when they come in, said owner Marshall Jespersen.

At Honda North, the turnover rate has decreased from 38 percent in 2017 to 29 percent today.

“There’s a sweet spot where you’re not actually spending money, you’re saving money,” Jespersen said. “It really is, in my view, actually a bargain.”

Katie Johnston can be reached at katie.johnston@globe.com. Follow her on Twitter @ktkjohnston.