Janitor Pay: Wage Worries

Bring up the idea of minimum-wage increases and many building service contractors blanch. Conventional wisdom dictates that any increase in minimum wage would result in demands of raises from low-paid janitors, reduced profits, renegotiated or dropped contracts, or all of the above.

Minimum wage for most workers in the United States is $5.15 per hour. Currently, 18 U.S. states and the District of Columbia require a higher hourly rate, and many municipalities either have outright wage minimums, or “living-wage” ordinances for companies doing business in the city or contracting with the government.

Every year, states and cities debate increasing their minimum wages — recently, voters in Florida elected to boost their minimum wage by a dollar an hour, and this month, leaders in the tiny New Mexico community of Sandia Pueblo guaranteed their workers $8 per hour. While the Federal government has yet to act on the national wage, during every Congress, new bills are introduced and debated.

Contracting Profits recently conducted a reader survey that shows BSCs are concerned about the impact any changes to their states’ minimum-wage laws would have; some are concerned their business could falter or fail. But other contractors take a less alarmist, more wait-and-see stance, and, surprisingly, some BSCs even want to see an increase in this wage benchmark.

Effects of an increase
The survey found that most BSCs pay more than their state’s minimum; not a single respondent paid their workers the federal minimum wage of $5.15 per hour. In fact, the average part-time janitor started out at $7.76 per hour, with 12 percent reporting starting wages of $10.00 or more. Specialists (such as floor crews or operating-room cleaners) made even more, topping out at more than $20 per hour.

While many building service contractors are ambivalent or will grudgingly accept an increase in their state, municipal or national minimum wages, some bemoan a possible wage boost.

“I do not support a new law which dictates an increase in our current minimum wage,” says Marc Lisenby, president of Master Building Services Inc. in Tucker, Ga. “In order for any minimum wage increase to make much difference, it would have ensure that a person working 40 hours per week would earn a wage above the current poverty line. If the minimum wage was increased to a suggested $7.25 per hour, we would be faced with increasing most of our prices to our clients who would understandably look for competitive quotes.”

Some survey respondents did predict that employees would demand a salary increase immediately in the wake of a change to the law, especially for wages near or below the new minimums. These BSCs predict a ripple effect, causing them to increase their prices and possibly lose accounts as a result.

“Even though my employees make over the minimum wage, an increase would cause me to raise my employees the same amount,” answered a BSC in New Mexico. “This would cause us to raise our prices to our customers, [who also] had to raise their wages and prices.”

In fact, this contractor already is feeling the pinch of a municipal minimum-wage requirement.

“In Santa Fe, we lost some accounts because minimum wage went to $9.50 per hour,” wrote the BSC in New Mexico. “Our accounts’ reasoning is that their corporate offices allow them ‘x’ amount of payroll dollars and they had to cut our services to add that money to payroll.”

Steve Parthree, president and CEO of One Way Janitorial Inc. in York, Pa., also says his company wouldn’t need to hike wages, as he pays more than the required minimums, but competition for good employees, especially young workers, might force his hand as other employers up their wages, making that work more attractive.

“Right now a high school student has a choice between working at a fast-food restaurant for $5.15 or cleaning for $8.00,” he says. “If the minimum is raised to $7.15, more young people or retired people will be attracted to fast food, making it harder to hire workers to do cleaning.”

Another potential problem, says Lisenby, comes when it’s time to rebid or renegotiate a contract.

“We would have to obtain increases from most customers in order to increase wages for employees,” he says. He expects that when his company asks for an increase, the customer would respond by obtaining competitive quotes. In his area, many contractors are operating with illegal labor, and pay less than the minimum anyway; he expects these illegal companies to try to compete with him for his existing clients.

“Therefore, it is quite likely that we would lose customers which would result in those employees being terminated and lower revenues for our company which may result in management reduction,” Lisenby adds.

While Gregg Jones, president of Advanced Facility Systems Group in Columbia, Md., doesn’t anticipate too much customer loss in the event of a wage increase, he does believe he’d need to take lower profit margins because many of his clients won’t accept a price increase no matter what.

“In bid situations, we are finding that the dollars for cleaning buildings continue to decrease,” he says. “As the minimum wage creeps up and the [cleaning] dollars decrease, the profit starts to drop as well.”

A beneficial boost?
But not everyone predicts doom and gloom, or even a few clouds, should the minimum wage go up — in fact, more than 35 percent of BSCs who responded to the survey said there would be little-to-no effect at all.

“I’m already paying more than the minimum,” explains Bruce Byxbe, president of The Cleaning Guys in Auburn, Wash.. “The [extra] few cents per hour wouldn’t break the company’s back.”

In fact, some BSCs think the government should act and bump minimum wages up, even if their own companies will take a hit, because they believe that workers deserve it or that it will improve their ability to compete in their market.

“I support increasing the minimum wage as I think workers in the cleaning industry work very hard and deserve higher pay,” says Jones. “The hard part is getting the industry as a whole to increase pricing. In the past several years we have had gas prices significantly increase, insurance costs have gone up, wages have increased, but the winning price to provide service has remained flat or decreased.”

Byxbe agrees.

“Raising the minimum would help lower paid and entry-level workers,” he says. “The extra dollars they earn would be put right back into the economy, paying for the things they need. Raising the minimum wage makes sense for America.”

Coping strategies
While contractors can write letters opposing (or supporting) minimum-wage increases, or contribute to lobbying bodies such as Building Service Contractors Association International’s Government Affairs Fund (www.bscai.org) or the National Federation of Independent Business (www.nfib.org) in order to influence policy, there’s not much to be done once wage laws go into effect.

In that case, BSCs who find they must boost their workers’ wages can look at their budgets to see if a salary increase can be absorbed through belt-tightening in other areas. However, if that’s not enough, and contractors need to seek an increase in prices, they should just make the best case they can to customers. They can educate their clients on the new laws, let them know if or how higher salaries negatively impact their bottom line, and suggest alternatives, such as a reduction in cleaning frequencies, if the customer can’t or won’t budge.

However, contractors should also remember that competitors are in the same boat. In fact, BSCs who already pay more than minimum wage may be at an advantage over their lower-paying counterparts, as the former may not need to raise wages, but the latter will.

“I suspect it would affect [competitors’] bottom line,” explains one anonymous survey respondent, “based on the fact those companies hire and pay an hourly wage at the minimum rate, whereas in my case I already pay above the minimum wage.”