House takes quick action pre-empting local minimum wage – fight continues despite Supreme Court ruling

The House Rules – Administrative Oversight Committee heard testimony Monday night on two identical bills that would pre-empt local efforts to increase minimum wage above the state minimum wage. The House Perfected a bill that combines the two identical bills yesterday and gave final approval today. The bill, HCS HB 1194 & 1193, now travels to the Senate for further consideration.

In a ruling last week, the Missouri Supreme Court invalidated a 19 year-old statute that prohibited local governments from raising their minimum wage above the state minimum wage because the original bill that created the statute had too many subjects. The Court then went to the most recently enacted statute that was passed over the objection of Governor Jay Nixon and observed language that allows minimum wage laws in effect on August 28, 2015. This language, while intended to allow special ordinances that require higher minimum wage for contractors doing business with certain local governments, was not intended to allow cities to rush minimum wage increases through their local government bodies, but that is exactly what happened.

Associated Industries of Missouri was a party to the lawsuit and, while disappointed with the Court ruling, is working with the Legislature to address the issue. The Missouri Legislature has already taken steps toward repealing the increased minimum wage by clearly pre-empting local government minimum wages, including the one in St. Louis City.

In the hearing on the bills, Mayor Francis Slay testified that 69,000 workers in the City of St. Louis would be helped by the City ordinance because they made less than $11 per hour.

Ray McCarty, president of Associated Industries of Missouri, testified that without additional capital being allocated to payrolls, a 25% increase in the amount required to pay to each employee at minimum wage would result in a 25% cut in the number of such workers.

For example, an employer with 20 minimum wage workers would currently pay about $15,400 per employee per year X 20 employees = $308,000. If that employer is required to pay each employee $10/hour, about $20,000 per employee per year, the employer may only afford 15 employees.  While those 15 employees would get an increase in their wages, 5 employees must be laid off.

business-taxesThe only way around this is to increase the amount allocated to wages in total, which would result in increased prices and a less competitive environment for businesses inside the City of St. Louis. Add this to the 1% additional earnings tax in the City of St. Louis and employers suddenly have two government created reasons to locate their businesses in surrounding St. Louis County, or elsewhere in the metro area, and avoid the City of St. Louis. This will reduce employment opportunities in the cities and many low income workers are likely to lose the jobs they now hold.

While the Mayor and nearly everyone testifying against HB 1194 and 1193 in the hearing this week talked about how it would improve wages for minimum wage workers, they failed to recognize some minimum wage workers would lose their jobs. Some businesses testifying at the hearing noted they would reduce staff to compensate and acknowledged this would harm the City’s efforts to attract employers, jobs and the workers they employ.

“The City of St. Louis apparently still believes money grows on trees and assumes all employers will simply increase the wages of those that are at minimum wage now,” said Ray McCarty, president/CEO of Associated Industries of Missouri. “They need to acknowledge if the state legislature fails to take action and stop this ill-conceived minimum wage increase, many low income workers will lose their jobs. What does the City say to those workers that will be unemployed?”

Also, employers paying more than minimum wage would be required to pay more for their employees, if they want to continue to pay above minimum wage and attract better workers.

The Committee voted to advance a combination of the two bills, HCS HB 1194 and 1193.