Most Employers Support Raising Federal Minimum Wage

​The call to raise the federal minimum wage has created a fair share of debate, with opponents arguing the move will harm businesses by adding hardships or making them less competitive—but a new report has found that the vast majority of employers are in support of a hike, after all.

A survey from Payscale, a Seattle-based compensation software firm, found that 75 percent of HR leaders and compensation professionals think the federal minimum wage should be increased, with 66 percent thinking a hike should happen automatically every year.

A big reason for employer support for a federal minimum wage hike stems from retention concerns, said Lulu Seikaly, senior employment counsel at Payscale.

"Employers understand the importance of a living wage and that the rising cost of living greatly impacts their ability to attract and retain quality workers," she said. While inflation has eased in recent months, the cost of living is still higher than it was, she said, which is a "concern for companies of all sizes employing low-wage workers."

"Organizations understand how expensive it is to backfill roles for employees who have left for better-paying jobs," she said. "At the end of the day, one of the main reasons an employee leaves a job is due to pay, so it's important to make sure that pay is fair."

Although opponents of raising the federal minimum wage often say the change would hurt small businesses in particular, the Payscale survey found that employers with fewer than 100 employees are actually slightly more in favor of raising the minimum wage (73 percent) than very large organizations with more than 50,000 employees (69 percent).

"A majority of HR leaders and compensation professionals in all industries think the federal minimum wage should be raised," Seikaly said. "They may disagree on how much and by what timeline, but all are in favor."

The federal minimum wage has not been raised since July 2009 and sits at $7.25 per hour. However, multiple states and cities have raised their minimum wages, with 30 states and the District of Columbia having set wages higher than the federal minimum wage.

Many proponents say it would be easier for employers to manage compensation if the minimum wage wasn't so disparate across so many locations.

"A lot of organizations employ and manage pay for workers in multiple states and cities," Seikaly said. "Setting a wage floor that is fair can be challenging when the minimum wage varies from $7.25 to $17 an hour, depending on where the employee is based."

The Payscale survey also found that 68 percent of organizations respond to minimum wage hikes by setting their pay floor above the new minimum wage.

Meanwhile, a number of employers have recently increased hourly pay for their employees. Food company Chobani recently boosted its minimum starting wage for all full-time employees in manufacturing and corporate hourly positions to $20 per hour (from $18.50), while Walmart earlier this year lifted its average hourly pay to $17.50 (from $17).

In general, total compensation has grown at a relatively high clip as a result of high inflation, the tight labor market and rising employee expectations. Recent research from consulting firm Mercer, for instance, found that 2023 annual merit increases averaged 3.8 percent, while total compensation—which includes merit awards as well as all other types of compensation increases impacting base pay, such as promotional, cost of living and minimum wage—increased by 4.1 percent. That's the highest increase since 2008.

Employers, however, are projecting that 2024 salary increases will come in slightly lower than this year's as inflation eases and the job market cools. Consulting firm WTW recently reported that U.S. organizations are budgeting an average increase of 4 percent in 2024, while a forecast from Payscale found that number to be 3.8 percent.