When Kristen Deptula and her husband bought the Canalside Inn in Rehoboth Beach, Delaware, in October 2019, they had no idea the coming summer season at the shore town would mostly be a bust due to Covid-19.
The innkeepers were able to access federal funding through the Paycheck Protection Program to help keep them going.
Deptula also credits another decision — paying their staff a $15 per hour minimum wage — with helping the business transition through the pandemic.
That wage is well above the $9.25 per hour currently mandated by the state. But Deptula, a Washington state native, had seen the higher rate succeed in Seattle.
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“It was just something I thought was a good practice,” Deptula said.
Now, Delaware is poised to gradually move toward a $15 per hour state minimum wage by 2025 once Gov. John Carney signs a bill passed by the state’s legislature earlier this month.
The move comes as a push to raise the federal minimum wage to $15 per hour, from $7.25, hit a roadblock when it was not included in the final American Rescue Plan Act. It was, however, approved by the House of Representatives.
Meanwhile, other states have increased their minimum wages. Florida is in the process of gradually going to a $15 per hour minimum wage by 2026 after voters approved a ballot measure last November.
Currently, 22 states have higher minimum wages than Delaware.
Yet it remains to be seen whether the Diamond State’s expected move to boost that rate could help prompt changes on the federal level.
“I don’t think the Delaware vote changes the dynamic a ton,” said Michael Saltsman, managing director at the Employment Policies Institute.
‘Vital tool’ for recovery
Still, groups like Business for a Fair Minimum Wage, a network of business organizations, owners and executives, applaud the Delaware decision.
When the cost of living increases, it makes it so that people cannot even afford the basics, said Alissa Barron-Menza, vice president at Business for a Fair Minimum Wage. The bottom line: Businesses need customers who can afford their products and services, she said.
Making ends meet on just $9.25 per hour in Delaware can be tough, according to the Massachusetts Institute of Technology’s living wage calculator. It shows that an individual worker in that state with no children must earn at least $15.32 per hour to make a living wage to cover all of their basic necessities.
The Delaware Restaurant Association had advocated for an amendment to delay the state’s minimum wage by one year to give restaurants and other small businesses more time to recover from the revenue losses prompted by Covid-19. However, the bill passed without that change.
Barron-Menza points out the minimum wage was first enacted to lift the struggling economy during the Great Depression.
“As we continue to emerge in this current economy from the pandemic, we need that same kind of boost again,” Barron-Menza said. “It’s bad for business and communities when working people can’t afford even the basics.”
Potential unseen costs
Delaware’s pay hike excludes the so-called tipped minimum wage for service workers and bartenders, which has proven to be a point of contention in the fight to set a higher standard pay rate.
Though some labor groups nationwide have pushed to eliminate the separate tipped minimum wage entirely, they have faced opposition from some service workers and bartenders who don’t want their tips put at risk, Saltsman said.
A higher minimum wage is not always unilaterally beneficial, Saltsman said.
Certain industries, like Delaware’s rural agricultural business, could be negatively impacted by the change.
Businesses that face higher wage costs may take steps such as reducing employee head counts or limiting hours, which could result in reduced benefits and other fringe costs.
“The costs of this will be made up somehow, and I think those costs tend to be borne by the employees,” Saltsman said.
Providing employees with a $15 per hour minimum wage has been successful for the Canalside Inn, which hosts corporate retreats and events.
The higher pay rate was instrumental in retaining the inn’s first employee through the pandemic, Deptula said.
“I really feel like because she had the stability of $15 an hour, she was able to figure out what her life goals were,” Deptula said of the employee, a pediatric nursing student who still helps out from time to time.
The inn now has five employees, which has helped as this summer season ramps up now that people are vaccinated and eager to travel.
“We have really happy team members,” Deptula said. “I think it’s partly because they don’t have to worry where their next paycheck is coming from and they have more stability.”
Sarah Titus, owner of the Comic Book Shop in Wilmington, Delaware, said she supports the move to a $15 minimum wage.
Since she and her partner bought the store about 11 years ago, they have made a point of paying an hourly wage above the state’s minimum required rate.
Her decision has helped retain employees at the store, which requires a lot of knowledge about the comic book industry. More important, she said, it also helps give employees some peace of mind.
“We want to know that our people aren’t struggling,” Titus said. “We want them to be able to come in fresh for the day and not be stressed about paying their bills.”