by Ken Vincent, Featured Contributor
We are all aware of the recent demonstrations in several cities pushing for a federal minimum wage of $15/hour. The hospitality industry, food service, and retailers have a high percent of their employees at or slightly above the minimum wage.
I read an article in the Dec. 12 issue of the WSJ that said that SeaTac, Washington has passed a local law requiring a $15 minimum wage for workers in some industries, but excluding others. That takes the local minimum up from $9.19, a 60+% increase. Other cities and states have, or are in the process of, raising their minimums too. Among the more notable are: D.C. +$1.25; California +$1.00; New York +$.75; and New Jersey +$1.00.
With many businesses in the most affected industries operating in the red, or on razor thin profit margins one has to ask what effect the increasing minimum wage laws will have.
To compound the economic impact of an increased minimum wage one has to consider that many of these same businesses are locked into expensive leases for real estate and FF&E. They have high cost debt and the prices of their raw products are continually ratcheting higher. Any cash reserves they may have are probably earning less that the rate of inflation. They are also faced with continually increasing costly regulations and now the ACA requirements.
Unlike the federal government businesses can’t print money, so these increased costs must come from either cost reductions, or price increases.
Some feel that their business in not affected because they already pay more than the minimum. History shows that significant increases in minimum wages have a ripple effect up the ladder. It tends to move all pay rates higher. Any business that doesn’t increase their pay rates finds they have a very difficult time in attracting new personnel.
So the question becomes, what is your business going to do to absorb higher wage requirements?
Will you cut jobs, reduce hours for some, close parts of your business, or raise prices? Do you even agree that in this economic environment this is a good time to increase the minimum wage?
They’ll just hire H1B visa holders and pay them minimum wage, but work them 100 hours a week that way the average salary is about the same as before.
If raising the minimum wage has no downside, then lets set it at $500 per hour for full-time employees (2,000 hours per year), then we can all be millionaires.