HVAC Contractors Should Expect Some Effect With a Possible Minimum Wage Increase
An increase to $15 per hour may bring unanticipated challenges
A recent poll at achrnews.com found two-thirds of respondents believe that a $15/hour minimum wage will have no effect on their HVAC businesses because they currently pay their employees that much.
There is no increase on the table at this time. The idea of increasing the minimum wage to $15 over a four-year period was floated during the last pandemic relief bill negotiations but failed to make it into the bill. Still, this is a long-time goal of many labor advocates.
The industry seems sure it can weather the increase — and it probably can. But it’s important to understand that this would be the largest increase in the shortest span of time since the federal minimum wage was introduced in 1938.
Air conditioning actually played a large part in the creation of a national minimum wage. Other countries had set such a measure in place in the years leading up to the Fair Labor Standards Act of 1938. What finally motivated American politicians to take up the bill was a fear by northern states that they would lose factories to lower-pay southern states. Manufacturing in that region had been hampered for decades due to the high temperatures. But industrial air conditioning was quickly changing that.
As a result, the minimum wage only covered jobs involved with interstate commerce. It was expanded to cover most jobs in the 1960s. The biggest single increase in the rate took place in 1950, when it almost doubled to 75 cents from 40 cents. It took nearly two decades before the minimum wage doubled again, reaching $1.60 in 1968.
The minimum wage increased almost every year starting in the late ’60s. In that time, it went from $1.25 at the start of 1967 to $3.35 at the end of 1981. This was a time of extremely high inflation in the U.S., along with major growth in the working age population. There have been seven increases since 1981. Between the start of 2007 and the end of 2009, the minimum increased more than 40%, going to $7.25 from $5.15.
The minimum wage hasn’t changed at the national level since then. However, 30 states have a minimum wage higher than $7.25, although no state reaches $15/hour. Several large cities, including New York City, Seattle, and San Francisco, have a minimum wage at or above that level.
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Despite the fairly unprecedented nature of a potential increase to $15/hour, many HVAC contractors believe it will have little effect. But it’s worth looking beyond the dollar amount of the wage and examining what it represents. Right now, a contractor who pays $15 is really paying more than two times minimum wage. If the minimum wage increases to $15, will that contractor pay $30? That would be two times minimum wage at that point.
Probably not. But the contractor was paying that amount for a reason — to attract more and better workers. What compensation will they have to offer to continue doing that?
The good news is that a higher minimum wage should increase the labor pool. The Congressional Budget Office projects a $15 minimum wage will lead to the elimination of 1.5 million jobs. Contractors could find more employees available. The flip side of that is they may compete more for workers if pay is even or only slightly higher.
The likely solution for contractors will be focusing more on non-financial compensation. This means creating a more pleasant work environment. It could mean changing some practices, such as limiting 24/7 service. Another option would be focusing on technologies and products that reduce the need for workers, such as smart systems and lighter materials.
Whatever HVAC contractors decide to do, they should start considering their options now. A $15 minimum wage sounds like something the industry can handle, but for most of the country, this will be an experience without much precedent.
