Missouri Proposition A would increase the minimum wage, create a sick leave mandate

Summary

Missouri Proposition A would amend Missouri’s existing minimum wage statute by increasing the minimum hourly compensation that an employer can legally pay an employee to $13.75 in 2025 and $15 in 2026. In 2018, Missouri voters approved Proposition B, which increased the minimum wage statewide on an incremental annual basis from $7.85 per hour until it reached $12 in 2023. Thereafter, the existing minimum wage would increase annually at the rate of inflation. As a result, Missouri’s minimum wage for 2024 is $12.30 an hour. If Proposition A is approved, the minimum wage will continue to be adjusted upward each year at the rate of inflation as it is under current law.

In addition, Proposition A would require most employers to offer paid sick leave. Businesses with 15 or fewer employees would need to provide at least five paid sick days per year, while businesses with more than 15 employees would need to provide at least seven paid sick days. Employees would also gain a legal right to carry over 80 hours of unused sick time from one year to the next. The government and many non-profit employers would be exempt from these requirements. 

Fiscal Impact

State budget analysts attempted to assess the prospective fiscal impact of Proposition A and concluded it would result in “one-time costs ranging from $0 to $53,000, and ongoing costs ranging from $0 to at least $256,000 per year by 2027” as the policy affects the pay and benefits of direct employees. In addition, “state and local government tax revenue could change by an unknown annual amount depending on business decisions.” That is, reduced corporate earnings could reduce corporate income tax receipts, while changes in employment levels could affect individual income tax or sales tax receipts.

Proponents’ Arguments For

Proposition A is sponsored by Missourians for Health Families & Fair Wages. The organization has raised $4.3 million in support of the initiative, coming from a range of progressive organizations. On its website, the organization argues that parents are forced to “decide between sending their children to school sick or losing a day’s pay because they don’t get paid sick days” and that the state’s existing minimum wage has not kept up with the cost of living.

Campaign spokesman Richard Von Glahn suggested to the Missouri Independent that the paid sick leave provisions are about fairness. He said, “Sick days are very common amongst the highest paid workers, you know, executives, those types of positions.”

State Rep. Crystal Quade, the Democratic candidate in the Missouri gubernatorial race, argues that minimum wage jobs aren’t only for the young. “The reality,” she told reporters, “is we have so many parents and so many people who are working minimum wage jobs, multiple minimum wage jobs to get by because they can’t actually find good quality high paying jobs in the state of Missouri.”

Opponents’ Arguments Against

The Missouri Chamber of Commerce and Industry opposes Proposition A, arguing that it oversteps decisions that should be made at the firm level and creates new liabilities for Missouri businesses. “A business owner’s ability to set their own workplace policies and procedures is really the bedrock on which our free enterprise system is built,” commented Kara Corches, the chamber’s interim president and CEO. “So this is creating a new mandate for employers in terms of wage as well as paid leave policy, that is really against that principle of ‘let business decide.’”

Ray McCarty, CEO of Associated Industries of Missouri, asserts that “you will have people that abuse the system” due to the changes.

Discussion

Standard economic theory indicates that as the price of anything increases, the quantity demanded will decrease. In terms of labor, this means that prospective employers will seek to employ fewer workers as the price they must pay for those workers rises.  

In theory, wages are primarily a function of productivity, and minimum wage laws tend to most strongly affect the labor market for workers with limited skills or experience, such as those seeking entry-level jobs. Empirical evidence confirms this is true. The Federal Bureau of Labor Statistics publishes data about the characteristics of minimum wage workers every year. Its latest release, summarizing data from 2023, shows that 3% of employed teenagers are minimum-wage earners while only 1% of workers over the age of 25 are minimum-wage earners. Workers without a high school diploma are also twice as likely to be minimum-wage earners. Similarly, part-time workers are twice as likely as full-time workers to be minimum-wage earners. Although this federal data assesses the characteristics of workers earning the federal minimum wage, which is lower than many states require, it demonstrates that the effect of minimum wage laws is concentrated at the entry level. To the extent minimum wage laws reduce employer demand for labor, relatively unskilled or inexperienced workers are likelier than skilled and experienced workers to experience unemployment. 

There are two main caveats to this reasoning. First, if almost all entry-level workers are being paid more than the minimum wage, then a minimum wage law will not affect employment levels. For instance, the average hourly wage for a Missouri food preparation worker was $15.92 per hour in 2023, while for retail salespersons, it was $17.17, according to federal data. Although these occupations are commonly entry-level and associated with minimum wage laws, the proposed minimum wage that would be implemented with the passage of Proposition A is unlikely to strongly affect market outcomes. 

Second, the cost or availability of different production techniques may affect the relationship between the minimum wage and employment offerings. For example, if machinery like a computerized sales kiosk is available at a lower cost than a minimum wage worker, businesses are more likely to substitute machinery for human workers, which would result in fewer job offerings. By contrast, if labor cannot be easily substituted for machinery, then employers may be compelled to retain human workers and offset the additional wage cost through some combination of higher prices charged to consumers or reduced corporate earnings. As economists at the Federal Reserve Bank of St. Louis concluded in 2021: “A higher minimum wage can also result in employers using automation to replace more expensive human labor.” 

The evidence on how minimum wages affect workers is clear: 

• Some workers get a pay increase.  
• Many teenage and young adult workers see their jobs cut. Despite the individual studies supporters will point to showing no job cuts, there are vastly more studies that find job reductions from minimum wage hikes. 
• Many more workers see their hours cut.  
• Other workers have benefits cut, especially healthcare. 

Despite evidence showing that minimum wage laws tend to reduce employment opportunities for entry-level workers or result in higher consumer prices that negate the purchasing power of nominally higher wages, minimum wage laws have been popular at the ballot box. Between 1996 and 2022, 28 ballot initiatives appeared across the country proposing higher minimum wages, and 26 of those were approved by voters. Nevada and Nebraska were the most recent states to raise minimum wages through ballot initiatives in 2022. As of 2024, Washington State has the highest minimum wage at $16.28 per hour, while Missouri, at $12.30 per hour, ranks 18^th among the states. 

Although organizers claim that wages have not kept up with the cost of living, the existing minimum wage is indexed to inflation so that it grows each year in proportion to living expenses. 

The language in Proposition A includes a requirement to award sick leave to all employees. This fringe benefit is an additional form of employee compensation and carries a financial cost that would push the implied minimum wage higher than what is stated. Employees would be awarded one hour of paid sick leave for each 30 hours worked, which implies an additional compensation value of $0.50 on an hourly basis. Employees in large firms would be permitted to use up to 56 hours of sick leave per year, while employees in small firms could use only 40. While this caveat may be intended to shield small businesses from some of the measure’s economic impacts, it’s not clear why a worker would need more sick time simply because they work in a business with 15 or more employees. 

The post Missouri Proposition A would increase the minimum wage, create a sick leave mandate appeared first on Reason Foundation.

Source: https://reason.org/voters-guide/missouri-proposition-a-would-increase-the-minimum-wage-create-a-sick-leave-mandate/