While the U.S. minimum wage remains at $7.25 an hour, several states, municipalities, and large employers are taking matters into their own hands in boosting pay for the nation’s lowest-paid workers. This trend undoubtedly will present challenges for smaller companies across the country.
The latest round of state and local minimum wage increases went into effect on July 1, with New Jersey ($10), Oregon ($11), and the District of Columbia ($14) mandating higher. At the same time, several cities and counties adopted higher minimum wages. They were led by California, whose unskilled and semi-skilled workers already earn $12 per hour. But in Emeryville, for instance, all jobs now pay at least $16.30 an hour. Hotel maids, porters, and desk clerks in Santa Monica received a 53-cent bump and now take home $16.63 an hour.
Increasing the federal minimum wage enjoys plenty of advocates – especially among Democratic Party presidential hopefuls – and is worthy of discussion. The $7.25 plateau (which has not increased in 10 years) imposes significant hardships on workers mired in minimum-wage jobs. Most advocacy campaigns target $15 per hour as an acceptable “living wage,” achieved through a series of aggressive hikes over a few years. Large companies are coming around, either through their own volition or in response to coercive tactics orchestrated by advocates (shaming, boycotts, worker walkouts, etc.) McDonald’s has announced it no longer is resisting the “Fight for $15” movement. Target and Amazon are moving swiftly to pay all workers at least that much.
This accommodation may be fine for large retailers and fast-food establishments. They can absorb some of the increased labor costs by raising prices, squeezing suppliers, and taking slightly lower profits. These “increase the wage” movements that are gaining steam across the country are fraught with unintended consequences that will burden small businesses and harm some of the very people the changes intend to help.
However, the report also noted that other low-wage workers would lose their jobs as small businesses would be unable to shoulder the increased cost of operating. Business owners would likely either make the tough decision to trim their workforce immediately after the wage impositions arise or they raise prices. Ultimately losing business to the Walmarts and Amazons of the world and being forced to close. Their workers would quickly go from underemployed to unemployed.
Even large companies that can afford these changes for some time would find ways to manage their payroll. Investments in technology, self-service options, and other automation would eliminate many low-skill jobs by making technology investments more cost-effective in the long run.
As minimum wages increase, employers may explore ways to reduce the payroll, insurance, administrative, and regulatory costs of full-time labor. One option is to make greater use of temporary employees to meet fluctuating service or production needs in blue-collar industries. KT Black Services is primed to supply qualified temporary and freelance workers to help you deal with demand spikes, vacation coverage, or other short-term requirements. Find out more by contacting KT Black today.