From the bottom, up

The minimum wage is going up. It’s no longer a question of if, but a question of when.

President Barack Obama has been pushing a hike in the federal minimum wage from the current $7.25 per hour, up to $10.10. In a deeply divided political climate, the proposal has found support. Seventy-one percent of Americans support a hike in the federal minimum wage according to a 2014 poll by CNN.

Across the country, major green industry states like Michigan, New York and California have raised their individual minimum wages, as have Vermont, Minnesota, Delaware, Hawaii and West Virginia. Landscapers already pay their employees more than the federal minimum – the average hourly wage for entry-level crew members is $10.60, according to Lawn & Landscape research. But owners say that any discussion of a boost in the minimum wage outside the industry puts pressure on them to increase hourly pay for their own employees.
 

Profit pinch.

Dan Gandee is the director of design and marketing for Aesthetic Gardens in San Jose, Calif., one of a growing number of cities that have raised their minimum wage to $10.10 per hour in advance of any federal changes.

The new wage rate in the area, coupled with California’s high cost of living make San Jose a natural economic experiment. “You start to see two things happen (following the hikes),” Gandee says. “Budgets get tighter when you estimate bids, and you get an influx of employees asking for raises.”

Gandee says he pays his employees between $14 and $16 an hour on average, but he has been approached by them to raise it to $18 to $20. “Of my employees, about 80 percent of them get raises, and about 20 percent of them either quit or drift out slowly,” he says. “Of that 20 percent, about 70 percent leave the market.”

According to Gandee, it’s a combination of both depending on the job. “For bigger, commercial projects, you eat the difference yourself,” he says. “With smaller jobs, you have to increase your prices or you won’t survive.” However, Gandee is not bitter about having to shell out the extra money or losing a few employees along the way. “The cost of living does not match the minimum wage,” he says. “You can’t have a labor pool that’s worrying day to day if they’re going to make it.”

But Christy Webber, owner of Christy Webber Landscapes in Chicago, where the minimum wage is $8.25 per hour, says any increases in the minimum wage won’t have much of an effect on her business. From her perspective, much of the effect of any hike will be watered down by the high number of undocumented workers in the industry who are unlikely to have their wages boosted following a hike. “Because they’re undocumented, they’re voiceless,” Webber says. “More than raising the minimum wage, we need to look at immigration reform.”

In the meantime, Webber’s major worry is how, with her stringent adherence to hiring only documented workers, she can compete with companies hiring undocumented workers and paying them wages far below legal and market rates.

Dealing with the change.

Landscapers already paying more than today’s minimum wage may have to either raise their wages or risk losing workers to another market, according to legal and industry experts we spoke with.

Patrick McGuiness, an attorney at Zlimen & McGuiness in St. Paul, Minn., specializing in the green industry points out that consumer buying power under the current minimum wage isn’t what it used to be.

“What you can buy with a 40-hour work week at today’s minimum wage is significantly less than what it was historically,” McGuiness says. “The main focus is giving more purchasing power to people of lower incomes.”

McGuiness says that if businesses won’t raise their wages relative to the new minimum wages, then they will lose their employees to other higher-paying landscaping businesses. Ultimately, the higher costs must be covered by either the business owner or the customer.

“If wages go up, costs could go up with it,” McGuiness says. “The higher costs could cross a price point which would lower consumer demand, which could mean less of a demand for labor.”

Charlie Hall, a professor and Ellison Chair of international floriculture at Texas A&M University, says that certain companies who pay around $10.10 now will have to cut into their profit margins to handle the ripple effects from the raise, or lose their workers to an easier job of the same wage.

“As labor costs increase, particularly for our market our prices must increase,” Hall says. “Any time we’ve seen higher wages in another industry, we’ve lost workers.”

Hall says that there will be only one saving grace for companies who must raise prices to cover higher wages: “Successful differentiation is the only way consumers will eat prices,” he says.

The author is a contributing editor with Lawn & Landscape Magazine.