BGSU to feel effects of minimum wage hike

Although the Ohio Legislature is still crafting the implementing legislation, it is anticipated that an increase in Ohio's minimum wage, approved as a constitutional amendment by voters last month, will have immediate impact on BGSU when it takes effect Jan. 1.

The increase, from the current federal minimum of $5.15 to the new state minimum of $6.85 per hour, will affect about 2,800 of the 4,500 students currently employed on campus. This affects all students who are paid by the hour and whose hourly base rate is less than $6.85, according to Michelle Simmons, senior associate director of the Career Center. Students will see the increase in their Jan. 26 paychecks, which cover the period from Dec. 31–Jan. 13.

Over the 15-week spring semester, the increase in wages is projected to be more than $250,000. However, “It’s difficult to predict costs because the number of student employees and their work schedules fluctuate weekly,” according to Simmons. The $250,000 figure is a “snapshot” of student employee costs at this moment, she said, and will likely change as administrators review and adjust department wage structures. In addition to the increased wages, there are administrative costs associated with implementing the new minimum wage, she added.

Because the minimum wage hike wasn’t included in BGSU spending plans for many areas for 2006-07, departments will, in many cases, have to absorb the increase in their operating expenses incurred from Jan. 1-July 1, 2007. While all units employing students will feel the impact, University Dining Services, Residence Life, Recreational Sports and Sports Programs, University Libraries, and other departments with sizeable student work forces are projecting the largest increases in student payroll costs. It is anticipated that some assistance may be available to help academic departments that are significantly affected meet the increased student wage costs.

That may mean reducing student work hours to stay within operating budgets or not replacing graduating student workers—or those otherwise leaving BGSU at the end of fall semester. Some students may maintain their current weekly earnings by working fewer hours per week at a higher hourly rate.

“In some departments, increasing the lowest paying jobs to $6.85 will cause wage compression—students who currently have jobs that pay $6.90 ($1.75 more than the new minimum) and above will then be making only a nickel more than the lowest paying job in their departments,” Simmons notes.

“Depending on the departments’ budget situation and the perceived need to be competitive, wage increases for higher-paying jobs may follow, or a ‘wait and see’ approach until the next budget period, and/or the restructuring of the existing wage rates within their departments may be adopted,” she said.

When base rates rise to $6.85, students will keep existing merit raises for exemplary work and longevity raises for total hours worked. Among students whose current base rate is below $6.85, about 625 have merit raises and about 90, longevity raises. Those premiums will be added to the base rate of $6.85.

For students already making at least $6.85 per hour in base pay, the decision whether to increase that figure will be up to individual departments, units and colleges.

Student Employment Services will consult with departments that wish to restructure their other departmental wage rates after the base wage rates have been increased to the new minimum rate. It will not be possible, however, to process any additional changes in the payroll system until after the successful implementation of the University’s Financial Management Solutions (FMS) financial accounting module scheduled for February 2007, Simmons emphasized.

Meeting the FMS timeline involves some of the same core group of University staff—Information Technology Services, the BG@100 Project and Payroll, as well as SES—who must address the minimum wage issue.

Departments can also be proactive in anticipation of future minimum wage hikes, according to Simmons. With the ability to restructure jobs and position descriptions, they can:
• Review existing job descriptions across the department and eliminate obsolete jobs.
• Centralize the responsibility for creating new positions and determining base pay rates within the department (or unit or college) to eliminate duplication, wage compression, and ambiguous job titles and descriptions.
• Create a classification system for student employment positions and base rates, defining positions by levels of complexity, job knowledge, technical competencies and supervisory requirements.
• Plan for regular review of student work performance to coincide with expected annual increases in the minimum wage.

December 11, 2006