Minimum Wage Hike

More and more colleges and universities are voluntarily choosing to increase their minimum wage. Why do they do it and how much does it cost?

July 2, 2015
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More and more colleges and universities are hiking their minimum wage above what’s required by their states and the federal government.

The increases -- often motivated by concerns about equitable pay for all employees, changes in local ordinances or pressure from advocates for low-wage worker -- can cost millions. Yet many colleges that are raising pay say they have an obligation to do so.

“We are a higher-minded part of the economy, and you would expect that we would be among the first to be doing the right things for our employees,” said Charles Dougherty, president of Duquesne University, in Pittsburgh. Earlier this year Duquesne raised its minimum wage to $16 an hour -- more than double what’s required by state and federal law.

Pennsylvania is among the 24 states where the minimum wage is set at federal levels: $7.25 an hour. Yet some of private and public colleges in those states and others are choosing to offer a higher minimum wage than required.

The cost of living has increased about 10 percent since 2009, the last time the federal minimum wage was adjusted, according to figures from the U.S. Department of Labor. A person earning the federal minimum wage would have an annual income of just $15,000, and advocacy groups have been popping up across the country seeking a higher minimum wage.

At Duquesne, the decision to offer double the minimum wage has been years in the making. In 2010, the university was offering a minimum wage of $12 an hour.

“We began to think that it simply wasn’t fair to our lowest paid employees,” Dougherty said. “We are a Catholic university so part of what motivates us in a sense of responsibility to the people at the lower end of our payroll.”

Yet many of the institutions that increase their minimum wage aren’t religious. And several are public.

Duke University has 36,000 employees, and offers the roughly 400 workers who earn minimum wage $12 an hour, two-thirds more than the university is required by law in North Carolina. Before the hike, approved earlier this year, the institution’s lowest wage was $10.91 and hour, still higher than state mandates.

Last year Indiana University raised its minimum wage to $8.25 an hour, a dollar above the minimum wage required by state and federal laws, and this year the institution raised it again to $9 an hour. The change affects up to 11,000 of the IU system's $40,000 employees.

“We didn’t spend a lot of time thinking about whether or not it was mandated,” said MaryFrances McCourt, IU’s chief financial officer. “We were trying to think about what is the right thing to do for employees.”

Yet McCourt acknowledged the financial impact of the wage increase is significant. “It’s not a minor amount of money,” she explained. So far, the hikes have cost IU about $2.5 million, including $1 million in 2014 and $1.5 million in 2015.

“These decisions were made during a time when the pressure on the top line is tougher than ever,” McCourt explained.

“There’s a strong focus on keeping costs down, nonetheless you want to do the right thing,” she continued. “If you’re looking to hold tuition flat, there’s a myriad of ways you can look to hold costs. It’s easy not to think of employees, but we didn’t even let ourselves go there.”

At Duquesne, 170 of the university’s 2,300 employees have been affected by the wage increases since 2010, at a total cost of $500,000 to the institution, which has an annual operating budget of more than $300 million. Duke declined to disclose the financial impact of its minimum wage hike, but an official there did say the cost was not “enormously substantial.”

As more states and cities consider hiking their minimum wage, universities can find themselves in the midst an often passionate debate. When municipalities increase their minimum wage, private institutions must comply with the new laws.

But mandated increases have put public institutions in a tough spot. In many cases, public institutions have claimed that, because they’re autonomous entities or have constitutional protections, they don’t have to comply with municipal minimum wage laws.

Yet they’re often under enormous pressure to do so.

A handful of municipalities in California have increased their minimum wage in recent years -- Los Angeles, for example, passed a law this year that will eventually increase the city's minimum wage to $15 an hour -- but California’s colleges don’t have to comply. That’s because, as a state agency, California’s public universities are only required to pay the state minimum wage of $9 an hour.

Seattle passed a law this year that increases the minimum wage to $11 an hour. The law gives large employers three years to bring their minimum wage up to $15 an hour. The state’s minimum wage is $9.47 an hour.

The University of Washington, considered a large employer, is complying with the law, even though its lawyers believe the public institution is exempt from the mandate.

“It’s the right thing to do, but it’s not necessarily the easy thing,” said UW’s interim president, Ana Mari Cauce.

Cauce says that if UW raised its minimum wage to $15 an hour tomorrow, it would cost the institution a lump sum of $25 million. The cost may end up being less than that, given that employees would have received pay increases over the next three years anyway. Or it may be more: “One of the things we’re still grappling with is what this does in terms of compression of the salaries that are above” minimum wage, Cauce explained.

To cope with the annual operating increase, UW is already looking at cost saving measures. Administrators are considering back office and administrative efficiencies, and possible savings through attrition. The annual operating loss will need to be accounted for: “It’s not like it’s happening and manna is going to fall from heaven,” Cauce said.

“Seattle is an expensive city. Puget Sound is an expensive region. We certainly want our employees to make a living wage,” she continued. “It’s also going to be a struggle…. We’re going to need to really think differently on how we can get things done without it causing higher tuition for students, because that’s not the way we want to go.”

As they decide to increase minimum wages, institutions have different philosophies on student workers.

At Duke, student workers are excluded from the wage increase. Kyle Cavanaugh, Duke’s vice president for administration, says that’s because Duke bases its wages off of the market conditions in the Durham area and in higher education. Students, he said, usually aren’t supporting themselves or their families.

At Indiana and Washington, student workers earn the same minimum wage as staff.

Washington’s minimum wage increase to $11 an hour this year affected far more students than staff. Roughly 70 staff saw their wages increase under the new minimum wage. Meanwhile, more than 2,600 students received wage increases. As the university continues raising its minimum wage, it expects more and more employees to be affected.

“When we think about student affordability, that’s helping,” said McCourt, of Indiana. “For a university to say we’re bringing [the minimum wage up], but it doesn’t apply to students, they’re cutting a huge piece off the table.”

Unsurprisingly, minimum wage hikes have been popular at the universities instituting them. It’s at least one change in an era of many changes that administrators consistently receive positive feedback on.

“We’ve had uniform support,” offered Cavanaugh, the Duke administrator.  



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