ST. LOUIS — Retail and restaurant groups are promising to fight “with all available options” against the increase in the state’s minimum wage approved by voters this week.

The measure will increase prices for consumers and “impose significant financial burdens” on restaurants, grocery stores and other small businesses in Missouri, six industry groups said in a statement this week.

Such government mandates and regulations “stifle job growth and economic development,” the statement said.

“It’s just too broad,” said Buddy Lahl, CEO of the Missouri Restaurant Association, in an interview with the Post-Dispatch last week. “The language of the proposition is misleading to voters. … It affects the little people. We’re going to stand up for small business owners.”

Opponents include the Associated Industries of Missouri, the Missouri Chamber of Commerce and Industry, the Missouri Grocers Association, the Missouri Restaurant Association, the Missouri Retailers Association and the National Federation of Independent Business.

The group is exploring “all available options, including possible legal action, to ensure that unemployment rates and cost of living are not adversely impacted by this proposition,” their statement said.

Voters last Tuesday overwhelmingly approved Proposition A, which will raise the state minimum wage from $12.30 to $13.75 per hour on Jan. 1, and boost it to $15 an hour in 2026 with annual inflation adjustments thereafter. The law also mandates that private sector employers with at least 15 workers cover one hour of sick leave per 30 hours worked.

Lahl said the coalition plans to take its argument to the state Supreme Court: Because it deals with wages and sick leave, Prop A is not a single-subject issue and therefore unconstitutional.

Making some changes

Prop A passed with about 58% of the vote. Many unions, worker groups and small business owners backed the effort.

Some St. Louis area entrepreneurs are applauding the decision, while saying they will have to make changes.

“Will it be a bit of a stretch for my small, independent business? Yes,” said Betty Bayer, owner of Betty’s Books in Webster Groves, Missouri, a suburb of St. Louis. “I’ll figure out how to make it work.”

The bookstore, which opened in 2021, has one full-time and three part-time employees. Bayer ends up working 60 hours some weeks to stay within her tight payroll budget, she said.

She voted in favor of the proposition so it’s now time to “walk the walk,” Bayer said.

Randy McDonald, co-owner of LA Taco Cantina in Maryland Heights, Missouri, said the measure won’t affect this largest payroll expense, as cooks already make above minimum wage. But the eatery will adjust how much it pays its servers, or tipped employees, who make at least half of the minimum wage, plus tips.

“There will definitely be a noticeable difference,” McDonald said.

McDonald said the cantina hasn’t raised prices in over a year, but to stay competitive and to cover the minimum wage increase some dishes will likely increase by 3% to 5%.

At the EdgyChic Boutique in Florissant, Missouri, owner Angela Harris said some of her workers can make up to $18 an hour and the shop offers a 401(k) plan with a company match. She hopes a higher minimum wage will bring more workers into the retail sector overall and deepen the hiring pool, because employees have been hard to find.

“It entices them to work here. A fair, decent wage equates to quality work,” she said. “It goes to show the heart of small businesses.”

Making above the minimum

Moves to raise minimum wages have long faced criticism, like the concerns raised by the Missouri business groups. Opponents say higher costs lead to job cuts and strain small businesses with small profit margins. The federal minimum wage is $7.25, which can be found in nearby states Indiana, Iowa, Kansas and Kentucky. Missouri voters also voted for minimum wage increases in 2018.

Jerome Katz, a professor at St. Louis University’s Chaifetz School of Business, said that for most small businesses that are financially healthy, this pay increase is “survivable.”

Businesses will see if they can cut back on expenses and raise prices to meet the new minimum wage, but this will happen across the board, he said. And typically, he said, communities are glad to see workers like themselves paid more.

“Everyone will grouse but we’ll get used to paying more,” Katz said. “Paying a little more hurts less when the money goes to people like them.”

The wage boosts will have the greatest impact at businesses that are “closer to the bone in regards to profit margins,” he said. They may cut back on labor. Some may even close completely.

“It will hasten their demise and force them to cut people and hours,” Katz said.

Retail, food services and service sector jobs, like daycares, will be impacted the most, given the high percentage of hourly workers, said Peter Boumgarden, director of the Koch Family Center for Family Enterprise at Washington University’s Olin Business School.

But many businesses already pay above minimum wage to attract and retain good employees, Boumgarden said.

“The competitive labor pressures are pushing numbers up,” he said. “It’s a tight labor market.”

Businesses paying above the minimum wage won’t see adverse effects from the increases immediately, but they may struggle in a few years as wages are adjusted up for the Consumer Price Index, said Grant Black, an associate professor of economics at Lindenwood University.

But the newly mandated sick leave will hinder businesses more than the wage increases, Black said. Not only will companies have to pay higher wages for workers filling in for sick colleagues, they’ll have to pay higher wages for the absent workers, too, he said.

“Managing, tracking all of this information could be quite a significant cost,” Black said. “A management, HR cost would be a big jump. For a smaller business, this is a whole other cost we had never considered.”

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