Minimum Wage Arkansas Analysis

Minimum Wage Arkansas Analysis

This assignment is intended to check your analytical reasoning skills, and this is a real-life scenario as businesses are having to deal with this when there are increases in the minimum wage in any state and/or at the federal level. This represents a significant change requiring organizations to deal with it strategically.

In the context of wages and salaries I want to share with you two terms—wage compression and wage inversion. These are clues for you to think about as you analyze this scenario.

Wage compression takes place when an organization hires new people, for example, at a rate that may be close to that of more tenured employees. Let’s say you are earning $15 per hour and have been in the job for 3 years. Perhaps due to labor market conditions (shortage of workers, for example, that forces your employer to pay $13 per hour for a new, inexperienced entry level worker. Actually this has been happening currently due to the Democrats giving away so much money that many people are making as much or more from not working than by working and have taken themselves out of the available labor pool. You may have experienced the fallout from this in trying to go to a restaurant or order take out, but the restaurant is so short of staff that it can’t take care of customers in a timely manner.

Wage inversion occurs when an employer hires new, inexperienced entry level workers at a higher pay than experienced employees that have been on the job longer. Let’s say you earn $15 an hour and have 3 years experience. Your employer hires an inexperienced entry level worker at $18 an hour. This is wage inversion.

In both of these scenarios, you are going to feel you are not being treated fairly, and in the context of Herzberg’s satisfier/motivator Theory ( which I hope you have studied in other courses), you are now dissatisfied, and may not be motivated to do your best. You will likely not put forth as much effort, or may look for another job that pays more, becoming a turnover statistic. Ironically, your old employer may end up having to pay more to hire your replacement than they would have had to pay you to keep you.

I am providing this because this has relevance to this little case, and because it happens all the time—it may have happened to some of you.

According to (November 13, 2018) the minimum wage in Arkansas was $8.50 in 2018, and on November 6, 2018 Arkansas Voters passed Issue 5 to increase the state minimum wage to $9.25 January 1, 2019.

  1. Analyze the impact of this increase in the state minimum wage on: a. Employees b. Employers
  2. This increase in the state minimum wage is: a. An opportunity b. A Threat C. Both and opportunity and a threat
  3. What does a company do about this (other than the obvious of raising the

minimum wage)? 

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