Why Do Employers Give Ripple-Effect Raises?
Marge Thomas, CEO of Goodwill Industries in Maryland, explains in an interview with The Gazette (Md.): “There will be a ripple effect [in response to Maryland’s recent minimum wage increase to $6.15], since it wouldn’t be fair to pay people now making above the minimum wage at the same level as those making the new minimum wage.” That is, without ripple effects, an increase in the wage floor will worsen the relative wage position of workers just above it. If there are no ripple effects, workers earning $6.15 before Maryland’s increase would not only see their wages fall to the bottom of the wage scale, but also to the same level as workers who had previously earned inferior wages (i.e., workers who earned between $5.15 and $6.15). Employers worry that these workers would view such a relative decline in their wages as unfair, damaging their morale—and their productivity. Without ripple effect raises, employers fear, their disgruntled staff will cut back on hard-to-measure aspects of the
