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Heads Up, Franchises: Minimum Wage Hikes Are Here

As 2024 dawns, it’s also the dawn of new minimum wage laws across almost half the country. NPR reports that 22 states (plus 38 cities and counties) raised their wages at the start of 2024, affecting nearly 10 million employees and putting almost $7 billion more into employees’ pockets (and, by extension, consumers). In contrast, 20 states will retain the current federal minimum wage, which remains unchanged since 2009 at $7.25.

 

Beginning January 1, 2024, 23 states are seeing minimum wage increases, as follows:

 

State * New Minimum Wage Increase
Alaska $11.73 $0.88
Arizona $14.35 $0.50
California $16.00 $0.50
Colorado $14.42 $0.77
Connecticut $15.69 $0.69
Delaware $13.25 $1.50
Hawaii $14.00 $2.00
Illinois $14.00 $1.00
Maine $14.15 $0.35
Maryland $15.00 $1.75
Michigan $10.33 $0.23
Minnesota $10.85 $0.26
Missouri $12.30 $0.30
Montana $10.30 $0.35
Nebraska $12.00 $1.50
New Jersey $15.13 $1.00
New York (NYC, Long Island, and Westchester) $16.00 $1.00
New York (all other areas) $15.00 $0.80
Ohio $10.45 $0.35
Rhode Island $14.00 $1.00
South Dakota $11.20 $0.40
Vermont $13.67 $0.49
Washington $16.28 $0.54

* In some states, minimum wage laws may have lower or exempt rates for tipped workers, smaller businesses, or other qualifying situations. 

 

What It Means for Franchises

Many franchises often rely on minimum-wage and low-to-moderately paid hourly workers due to the nature of these businesses. For those operating in states with these increased wages, care will have to be taken to consider the impact of the new wage levels on budgets so that no one – employee or franchise – is caught by surprise.

 

Historically, some franchises have chosen to attempt to “offset” required wage increases by shifting some full-time employees to part-time, but the cost savings may be canceled out by a potential downturn in service quality, reputation, and employee engagement; other strategies may be more effective at maintaining quality service while fitting into budget requirements. In fact, a 2023 working paper from researchers at UC Berkeley actually found that minimum wage hikes don’t have to lead to job cuts and can often be subtly passed on to customers without much impact on business.

 

Although it may initially require some adjustment, the increased minimum wage may also positively impact franchise revenues. More money in employees’ pockets means more income to spend and a higher likelihood of spending money at these very same franchises! With 2024 bringing more minimum wage increases and a continued focus on pay levels overall, viewing it as an opportunity rather than a burden can open doors to innovative strategies and an approach that improves your employment brand to attract quality talent for the long term.

 

About the Author

Nancy Estep-Critchett is a founding Partner of Blue Rock Search, with oversight of the Franchise Practice. She has 30 years of successful working experience as a business advisor and executive recruiter in the franchising space. Nancy has built solid relationships which have spanned decades with industry professionals and internationally recognized brands.

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