Debating the Impact of a Minimum Wage Increase
HVAC professionals discuss the pros and cons of a government-mandated pay raise
New York and California recently made headlines when they became the first states in the nation to adopt plans to raise their statewide minimum wage rates to $15 per hour.
The $15 minimum will be implemented in New York City before it goes into effect statewide. For businesses in New York City with at least 11 employees, the minimum wage would increase to $11 before the end of 2016. That amount would then increase $2 each of the next two years. For smaller companies in the city, the minimum wage would jump to $10.50 by the end of the year, then another $1.50 each year for three years. Meanwhile, the California legislation will raise the statewide minimum to $10.50 on Jan. 1, 2017, for businesses with 26 or more workers, followed by several incremental increases to $15. Smaller businesses will have an additional year to phase in each increase.
The controversial legislation has drawn a myriad of comments from political parties, workers, and business owners, including HVAC contractors.
Ed Wolfe, owner, president, and CEO of Go Green Express Home Services in Newburgh, New York, said he is against raising the minimum wage, and he doesn’t think federal, state, or local government should be able to mandate pay rates.
“I don’t see how this can be a good thing,” Wolfe said. “It raises the bar for everything. We normally start people in the $10-$12 range, which is above minimum wage now. Now, it’s going to put pressure on us to start people at a higher wage because minimum wage is kind of the de facto bottom of the barrel. It’s going to make it harder to bring people in, try them out, and set them on a career path. This is a bad thing for small businesses.
“I don’t think the government has any business in the marketplace affecting wages or a lot of other things,” he continued. “I think the market should control it [minimum wage]. It’s not only about the minimum wage; it’s about the health benefits we have to pay. So it puts a lot more pressure on employers when we’re hiring entry-level people. We’re already having a labor crisis and I think this is going to make it much worse. If minimum wage is required throughout all low-end, non-career-path types of jobs, then it’s yet another lost tool we once used to entice prospects to consider the trades.”
The minimum wage legislation will put pressure on the HVAC industry, as it is a tough business for an entry-level worker, Wolfe noted.
“There’s a much higher ramp-up expense to get entrylevel employees into revenue-producing mode than there is for a fast food establishment or janitorial service. If low-end jobs are paying lesser wages, we could afford to be a little higher to entice new people, and this would allow us to afford to pay the training costs to get new hires up to speed. This will end that. So, we’ll end up paying minimum wage, the same as everybody else.”
Matthew Pillius, owner and CEO of Royal Class Service in New Windsor, New York, said the $15 minimum wage legislation will not have a significant impact on his business because many of his employees’ wages are already at or above the proposed wage rate.
“When hiring more qualified people, they’re already commanding a higher wage, so many of our team members are well beyond this rate or right in line with it,” Pillius said. “We assume by paying a higher wage, we’re going to hire better team members.
“One of the negatives is we now have less of a company wage ladder to climb and a new norm of complacency can set in,” he continued. “The new minimum wage raise is a salary or wage reduction to everyone else in the wage pool and will eventually become a negative to businesses. To maintain or retain the top performers, they will also expect that relative increase. New hires will not need to strive to prove themselves or put in additional hours, as they may feel comfortable with the new $15 wage right from the start.”
Trying temporary labor on a trial basis will not be as favorable at the higher wage for a non-income earner either, Pillius added.
Pillius is in favor of a government-set minimum wage, as he believes it’s a steady way to prevent people from taking advantage of workers. “That has certainly been played out in history and would likely repeat itself. For me, the number doesn’t matter. We will pass it along to the customers, as needed, to operate the business effectively. No matter what, the wage should be in line with the work being performed and the level of complexity, responsibility, and effect it may have on others or self-health and safety.”
OTHER STATES, COUNTIES ENACTING HIGHER WAGES
Rich Biava, vice president of GAC Services in Gaithersburg, Maryland, said his company is already dealing with rising minimum wage rates. In Montgomery County, where GAC Services resides, the current minimum wage of $9.55 will increase to $10.75 on July 1. The mandated minimum wage rate will again increase to $11.50 on July 1, 2017.
Biava said all of his employees earn more than the state’s mandated minimum wage. “About 10 percent of our staff are in the $11-$15 range, and all of these individuals have been here less than two years and didn’t have any experience before taking a job in the warehouse, customer service area, or out in the field.”
Biava said raising the minimum wage will not have a profound impact on professional contracting businesses in the industry.
“There are so many moving parts in our business, and there are always ways to be more efficient to minimize the minimum wage impact,” he explained. “When rules change, we will adapt and figure out how to manage a successful business. When you think about it, raising the minimum wage won’t help all the people who have low-paying jobs. When salaries rise, expectations change. A manager or business owner expects less from a $10-an-hour employee than a $15-an-hour employee. This change will increase an owner’s — or at least the manager’s — attention to the productivity of a baseline employee. We may be a little less lenient toward mistakes and expect them to execute at a higher standard. As the minimum wage increases, the entry-level job will become more competitive. People without skill sets will still be left without jobs. Hopefully this will encourage people to improve themselves and their skill sets.”
THE GREAT WAGE DEBATE
Floyd ‘Butch’ Azbell, HVAC instructor at Worcester County Public Schools in Newark, Maryland, believes there should not be a mandated $15 minimum wage.
“Working at a fast food restaurant should not be a job you try to make a living with,” he said. “It should be a job for entry-level workers aiming to make ends meet while attending a school to learn a valuable skill. It is already hard to convince a young apprentice to crawl in attics and crawl spaces. That gets only more difficult when they recognize they can make the same amount flipping burgers. Yet the apprentice has skills.”
The legislation will also create salary compression issues — not only in the trades, but other business sectors, as well, according to John Smith Jr., director of workforce development, Sobieski Mechanical, Wilmington, Delaware. “There are many hidden or not-so-apparent direct and indirect costs that will surface from this. The cost of doing business will be driven up and will be passed to the consumers in all businesses. While a company may be paying around the new minimum or above, it will still be impacted.”
Carter Stanfield, director of the air conditioning technology department at Athens Technical College in Athens, Georgia, said the argument will soon be moot for HVAC contractors.
“Very few, if any, HVAC workers should be working anywhere close to that [minimum] wage,” he said. “Why? Because of supply and demand. Contractors are having an increasingly difficult time getting workers. Competent people are in short supply for virtually every field. We are going to have to convince the dwindling supply of capable workers that HVAC is where they belong, not in one of the other industries desperate for help. That is just to attract intelligent, capable, and reliable people — not ones with proven skills. Now, if you want someone who actually knows something about HVAC and is also competent, $15 an hour is likely not going to cut it.
“If you read the details of the agreement, this $15 minimum wage will not happen until 2022, which is six years away,” Stanfield continued. “In six years, you will not be able to hire anyone who is competent in our area for $15, regardless of the law.”
Publication date: 6/20/2016