Compared to the rest of the country, Massachusetts is a high-cost state, and it always will be. Nearly everything from housing to winter heating to owning a car, and certainly health care, is more expensive than other regions. Because of this, it stands to reason that Massachusetts should be a high-wage state.
Today, the unemployment rate is 2.9 percent, and businesses need to focus on talent attraction and retention, with upward pressure on wages an inevitability. Rumblings in the State House by groups like Raise Up Massachusetts supporting another bill to stage the minimum wage up to $15 an hour do not make sense. Massachusetts minimum wage is now $11 per hour – the highest in the nation – and it makes sense to leave it right there, at least in the central and western parts of the state.
While we're a high-cost state, not every region of Massachusetts has the same cost of living. Greater Worcester already touts itself as the affordable urban destination compared to Boston and the suburbs to the east. Areas further west of Worcester offer even lower-cost options. The state can't set a minimum wage for the highest-cost areas without materially damaging employers in lower-cost areas.
The $11 minimum wage that went into effect on Jan. 1 is 10-percent higher than the second highest state minimum wage (California) and is 52-percent higher than the federal minimum wage ($7.25). While California plans on reaching the $15 threshold by 2023 through a multi-year approach, Massachusetts legislators will have to convince Gov. Charlie Baker now is the time for such a move, as he wisely favors waiting to see how this last three-year plan that raised minimum wage from $8 to $11 impacts businesses.
As Baker's waiting period begins and before any momentum might build in the State House for a new minimum wage plan, we would like to offer an alternative regional approach. New York already has a model to follow where New York City employers have one minimum wage ($11), Long Island and Westchester have another ($10), and the rest of the state has something different ($9.70). Massachusetts could follow this model, give individual communities the right to set their own minimum wage, or set up a complex formula where the minimum wage is based upon a cost of living index in a particular region or community.
Cost of living and the types of businesses that flourish based on the cost of labor is different in Worcester, Boston, Fitchburg, Springfield, Marlborough and New Braintree. The business implications of hiking the minimum wage to $15 for a Boston fast food restaurant will be more easily absorbed because its customers can better afford the subsequent price increases (due to the higher average wages earned in Eastern Massachusetts) vs. a Leominster manufacturer who relies on a pool of minimum wage workers because that business model is based on having lower-cost, higher-quality products than competitors in a global marketplace.
Offering employees the best wages possible based on their talent and experience is just good business. Setting a minimum wage floor that all employers must adhere to is a necessity, but it has a breaking point. For the more affordable regions of the state, the breaking point is just beyond $11 per hour.