As a small business owner, Joe Chevalier believes in passing along the profits he earns to his staff in the form of higher wages.
Employees at his store, Yellow Dog Bookshop in downtown Columbia, make more than the current state minimum wage of $12.30 an hour, and Chevalier feels that has helped with employee retention.
“It's good to have a staff that's going to stay with you, and if they're paid more, then they're more likely to stay there,” Chevalier said. “You're not going to have to train new people, and the people you have will have that extra experience and will be better for you. We've had a really stable staff here for the last three years, and that's helped us immensely.”
Bookstores often operate on thin profit margins, but this doesn’t dissuade Chevalier from supporting a proposition that would raise the minimum wage in Missouri to $15 an hour.
“We do have a fairly small profit margin in bookselling. It's not something you go into to make a million,” Chevalier said. “But as our sales have done better, we've always shared that with our staff.”
Chevalier believes raising the minimum wage would give affected workers more disposable income, which could potentially be spent at local small businesses like his.
“If they're making a minimum, then they probably don't have a lot of extra spending money,” Chevalier said. “So what they're going to do, they're going to be more able to buy food. They're going to not feel so insecure about rent, and they're going to be able to maybe have a little extra spending income, which is nice. They might come and buy books.”
On Nov. 5, Missouri voters will decide on Proposition A, which would boost the state’s minimum wage to $15 an hour by 2026. The minimum wage would increase to $13.75 in 2025, rising an additional $1.25 in 2026. Further increases would be considered each year based on changes in the consumer price index, beginning in 2027.
It would also require that employers offer paid sick leave, at a rate of one hour of leave for every 30 hours worked. Employers with more than 15 workers would be required to provide seven days of paid sick leave a year, while employers with fewer than 15 employees would only have to provide five paid sick days.
An analysis from the Missouri Budget Project, a public policy research group that advocates for "Missouri's most vulnerable families," estimates that more than 560,000 workers in the state, or about a fifth of Missouri’s workforce, would get a pay bump if this passes. A Missouri Business Alert analysis found that a $15 minimum wage would equal an extra $5,600 a year, before tax, for full-time employees.
Effects of minimum wage increase differ by market
While this would likely be a welcome change for individual workers, raising the minimum wage could have implications for the larger state economy. Eric Parsons, an economics professor at the University of Missouri, said the effects may vary across the state.
“There's not a uniform impact,” Parsons said. “It's going to be differential based on the geography, the labor market in the area, and it's going to be differential based on different types of businesses as well.”
Parsons said that in areas where the median income is already much higher than the minimum wage, there will be little impact. But, in regions with lower median incomes, he believes increasing the minimum wage to $15 an hour is more likely to negatively impact the local labor market
“Workers that have a job and maintain a job working at minimum wage, you're going to see an increase in wages,” Parsons said. “So that's good for them, but it's also worth noting there are some workers who may not be able to find a job, or who, over time, might lose a job because of the higher minimum wage.”
In many cases, rural areas of Missouri tend to have lower median incomes. According to the Missouri Office of Rural Health and the state’s Department of Health and Senior Services, a county is considered rural if it has less than 150 people per square mile and lacks any part of a central city in a metropolitan statistical area. Using this definition, there were 99 rural counties in Missouri in 2019, which accounts for more than 80% of the state’s counties.
“To the extent that rural areas are going to have lower median wages, it's likely to impact them more negatively than urban areas that have higher median wages,” Parsons said.
The Missouri Economic Research and Information Center found that the annual median income for all industries, both public and private, in the state was about $61,700 in 2023. The median income for every county classified as rural was below that, and only Jackson and St. Louis counties had annual median incomes higher than the statewide figure.
Before taxes, a full-time worker earning the current minimum wage in Missouri would make roughly $25,000. Ripley and Worth counties, both considered rural, are the only two counties in Missouri to report a median annual income under $30,000, meaning they are the kinds of areas Parsons described where the labor market could be negatively affected.
Retaining, but not replacing
For many workers, there is little risk of outright losing their jobs at the onset of the minimum wage increase. Barton Hamilton, an economics professor at Washington University in St. Louis, said firms are likely to retain workers if the policy changes.
“Existing workers, the firm has spent some money training you and things like that, so if the minimum wage goes up, you're more expensive,” Hamilton said. “But, to replace you is even more expensive, so the firm doesn't want to let you go.”
However, as those workers begin to leave their positions, it is possible that the firms won’t replace them. And if there are open positions that must be filled, the offer of higher wages may attract more job applicants, meaning that the employer has the opportunity to pick the most skilled laborers from a larger pool of prospective workers.
“You have more people looking for jobs than there are people hiring,” Parsons said. “The people who are hiring can be choosier in who they're hiring, and so it's the ones who have the lowest skill levels that are the most likely to see the hit.”
Generally, the workers with the least experience tend to be teenagers in search of part-time jobs. Kara Corches, interim president and CEO of the Missouri Chamber of Commerce and Industry, said that this is one concern that the business group has with Proposition A. The chamber has encouraged the public and its members to vote against the measure.
“With this amount being raised, this could just essentially drive those young adults out of the labor market,” Corches said.
David Mitchell, an economics professor at Missouri State University, said that these early jobs are critical points in the lives of young workers, not only because of the income they earn, but because of the work experience that they often gain in these roles.
“Those kids who didn't get the chance to get that job, they don't get the skill set,” Mitchell said. “They don't learn how to show up to work on time. They don't learn how to say hello to customers. They don't learn the importance of just basically being a good employee and learning how to work, and then that actually hurts them basically later on in life as well.”
If the wage increase goes into effect, some firms may begin to think about downsizing dependence on a human labor force. In the long term, Hamilton said, businesses may turn to automation as a way to complete tasks that can be done without a person.
“So in the short run, there's certain things that (businesses) just can't do, they don't have time to do, like increase automation, or have self checkout at the cash register and that sort of thing,” Hamilton said. “In the longer run, they can do more of that, more of what we would call capital labor substitution. So we're using more machines, software, etc., to replace workers.”
Prices could follow wages
If the minimum wage is increased to $15 an hour, Missouri firms must then consider how to factor the added expense into their operations. Parsons said there’s not one definitive answer as to how businesses will do this.
“Some businesses are going to have that ability to raise their prices, and then you would expect that the consumer pays the bulk of that minimum wage increase,” Parsons said. “Other businesses aren't as capable to do that. Maybe it's a very competitive industry, and if the prices get raised, consumers stop buying the product, and so then the businesses are going to eat that minimum wage increase more.”
Hamilton said that it may be more difficult for firms that sell goods outside Missouri to increase prices as a means of offsetting the expense of higher wages. This is because those businesses have to compete with companies that may be based in areas with lower wages and can offer lower prices for similar products.
“The people who are producing more broadly and selling stuff elsewhere in the U.S. or abroad where minimum wages haven't gone up, to be able to compete they can't pass on their wage increases that they're paying to their customers,” Hamilton said.
For companies that primarily have local competition, such as restaurants, there is a greater ability to pass on wage increases in the form of higher prices.
Kansas City straddles the border of both Missouri and Kansas, which currently has a minimum wage of $7.25 an hour. Hamilton said that, in the short term, Missouri companies will either have to comply with the wage increase or close up shop, but some near Kansas may think about crossing the border in time.
Missouri would have a higher minimum wage than seven of its border states, if the measure passes. Although some businesses might consider relocating, workers living near any of the state’s borders will also have the option to commute to Missouri to earn higher wages.
“Some of those folks may take a job in Missouri, which again increases the competition for jobs a little bit,” Hamilton said.
While some businesses may respond to a minimum wage increase with a hike in prices, Chevalier, the Columbia bookstore owner, doesn’t anticipate this happening at his business. Sales at Yellow Dog Bookstore have been good this year, and Chevalier doesn’t believe in keeping a disproportionate share of the profits.
“I think if people look at it as I do, which is, ‘Let's share our success with our employees first,’ then I would hope that it won't be a problem,” Chevalier said.
Yasha Mikolajczak contributed. This story was originally published by the Missouri Business Alert, a fellow member of the KC Media Collective.
