Why hasn’t Indiana raised its minimum wage? Several members of our audience inspired this question.
An MIT calculator shows the average living wage for an adult Hoosier with no children is more than $15 an hour.
Andrew Butters is an associate professor at the Indiana University Kelley School of Business. He said employers may oppose increases in minimum wage as this would mean they have to decide how to pass on extra labor costs.
Butters said employers can internalize these costs or pass them onto consumers.
“To the extent that it’s more expensive for me to hire the workers to employ in my restaurant or to my grocery chain or for, for that matter, whatever business I’m working in, I might end up then passing those costs on to higher prices that are then going to be ultimately borne by the end consumers,” he said.
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Butters said in industries that may not be able to pass these costs onto consumers, the company may find itself bearing the weight of higher labor costs.
“[Businesses] can’t pass those additional costs on to my consumers, whether that be because I’m in a very competitive industry where if I was to raise my price, I’d lose customers, well then obviously that’s going to have an impact in terms of my business,” he said. “I’m going to be now potentially a little less profitable.”
A Senate bill that would’ve raised the minimum wage from its current $7.25 per hour to $13 per hour did not receive a hearing during the 2023 legislative session.
When asked why this may not have been considered during the session, Butters said many industries and careers are already offering higher wages than what the minimum wage increase would offer.
“If the minimum wage is basically below the wage at which kind of current market conditions are facilitating that demand equaling supply, then a minimum wage increase that remains below whatever the wages are that most workers are receiving just by the nature of businesses needing labor, then there’s not going to be really any effect,” he said.
The bill’s author did not respond to a request for comment on its status in the last session.
He said tight labor markets since the pandemic have also increased the bargaining power of workers and made for more competitive pay to encourage workers to apply for certain industries.
On the other hand, Butters acknowledges a minimum wage increase would directly impact workers.
“There’s the direct benefits to the — to the labor and the households that are receiving the increases,” he said.
However, he said even without these increases, the current state of the labor market should be providing similar effects to employees as well.
“Right now, the labor market is very, very strong,” he said. “And in fact, again, that should very, very much benefit workers and households that are able to reap the benefits of that.”
He added with this labor market, it could be a good time for Hoosiers to switch careers or pursue other jobs.