In November 2018, nearly two-thirds of Missouri voters approved Proposition B, an initiative that substantially increased the state’s minimum wage.
The hike raised base pay to $12 per hour from $7.85 – a 53% increase – over five years, reaching that target on Jan. 1.
Many workers have celebrated the hike, and some business owners have, too. In December, Andy Faucett, owner of Bambinos Cafe, shared his satisfaction with the increase in a statement put out by Business for a Fair Minimum Wage, a national network of business owners and others who supported Prop B.
“As a family business, we’re glad to see Missouri’s minimum wage going up for the new year,” Faucett said. “It’s an investment in Missouri communities.”
Bambinos raised its starting pay to $14-$15 an hour in 2022, and Faucett said he has had no trouble finding dependable staff.
“We pride ourselves on taking care of our customers and our employees,” he said.
Through the increase, though, some businesses are experiencing impacts beyond payroll.
Teresa McGeehan, co-owner and operator of 19 area McDonald’s restaurants through Class Act Management Co., said the minimum wage increase happened alongside increases her company already was experiencing during a nationwide worker shortage.
In 2022, she noted, the minimum wage rose 65 cents, but her company’s increase was only by an increment of 66 cents per hour.
“We were already there because of what we had done in 2021-22,” she said, adding the company was already taking care of its people. “We valued them more than just that minimum wage.”
This month, McGeehan said the average wage for nonmanagement staff is $14.60 an hour, compared with an average of $10.29 in January 2020.
Still, it’s a challenging time for fast food.
“When I look at it, I don’t know that the increase was really as much about minimum wage as it was just staffing shortages overall that our industry’s facing,” she said.
The minimum wage leads to pay compression, and that’s the real challenge, according to McGeehan.
“With compression, existing employees don’t always move up as high as what the minimum wage increase is, so there’s a smaller gap between workers that are experienced or workers who take on additional responsibility,” McGeehan said. “When there’s not that big a spread, there’s not that enticement to want to take on extra responsibilities.”
She added that some of her employees do not work in the restaurants but instead function as office staff, repair equipment or handle marketing and social media.
“They bring a special skill, and there’s value to that,” she said. “But the gap between entry-level jobs and what we can afford to pay them isn’t as big as what it used to be.”
A majority of workers in McGeehan’s restaurants are high school students, moms or retirees, she said. When some calculated that they could work less and make roughly the same amount of money as they did a couple of years ago, she said many opted to work less than full time.
“The increase really had a significant impact on how our employees worked,” she said. “The more they were paid per hour, the less they wanted to work.”
Along similar lines, a higher starting wage didn’t seem to entice potential workers, she said. For a while during the pandemic, McGeehan’s restaurants opened only their drive-thru windows to customers. These days, dining rooms are open again, but McGeehan said more workers are still needed – roughly 10-20 per store.
Class Act Management Co. has employed about 1,300 people over the last few years, down from a high of roughly 1,800. In the past three years, labor costs have increased by $3.2 million, half of that from 2021 to 2022. Revenue has stayed flat, McGeehan said.
While fast-food restaurants are facing operational challenges, Shannon Porter, CEO of Empower: abilities, faces a grim prospect of having to cut back services for people with disabilities, the demographic served by the nonprofit.
Empower: abilities offers two types of home-based services, one as a vendor where it employs caregivers, and the other, its largest program, which sets up people with disabilities as small-business owners who employ their own caregivers. This program is called consumer-directed services.
“The person with the disability hires who they want for care,” Porter said, noting her organization is the fiscal intermediary and provides bookkeeping, case management and other support.
The state legislature sets Medicaid reimbursement rates to cover home-based services, and when the minimum wage was $7.65 in 2015, the rate was more than double that base rate of pay at $15.56 per hour. As Proposition B brought in higher base pay, the legislature kept the reimbursement rate at the same $15.65 level until it rose to $15.96 in 2021, when the minimum wage was $10.30.
Empower: abilities funds most of its programs to support people with disabilities through the money brought in by consumer-directed services – specifically, through the difference between the reimbursement rate for care and the cost spent on caregivers and overhead.
Reimbursement allocated by the state legislature for in-home services for people with disabilities has not kept up with wage hikes, and Porter said Empower: abilities is hurting.
“Politics come into play,” Porter said. “The state legislature resented the fact that citizens voted in a minimum wage increase, and I think they pushed back a little bit.”
Porter worries about the people who depend on consumer-directed services, since caregivers, lured to employers offering higher wages, are in short supply.
“Without these services being consistent and daily and high quality, they’re going to have a bad outcome,” she said.
Porter gave the example of one of the program’s consumers who uses a wheelchair and has had occasions when no worker was available to get her out of bed or help with her bathroom needs. This person has ended up in the hospital with bedsores.
“We’re having to make some hard choices about our budget to keep the organization in existence,” Porter said. “We’re going to have to restructure how we survive. Right now, we’re trying to build some new fee-for-service programs.”
One idea is to offer services for people who require help to age in place, she said.
“I’m hopeful some of those things we can charge fees for, for people who can afford it,” she said. “We’re becoming really lean and efficient.”
According to Empower: abilities’ recent Form 990s, it finished 2020 with $112,000 net revenue, but the previous year posted a net loss of $286,000. By comparison, net revenue was $485,000 in 2016.
The congregation at Crossway Baptist Church is building a children’s wing at the west end of the church, and beginning in 2024, it will be home to a Christian academy.