Posts Tagged ‘minimum wage’

A Minimum Wage Increase and Small Business

Thursday, August 28th, 2014

© <a href="http://www.dreamstime.com/reddaxluma_info#res2965056">RedDaxLuma</a> | <a href="http://www.dreamstime.com/#res2965056">Dreamstime.com</a> - <a href="http://www.dreamstime.com/royalty-free-stock-photo-monimum-wage-increase-ahead-image39252345#res2965056">Monimum Wage Increase Ahead Photo</a>The federal government raised the minimum wage that federal contractors must pay to its workers and the Administration is pushing for a national minimum wage increase to $10.10 per hour.

The Department of Labor says it will benefit 28 million workers. Opponents of the increase argue that it will hurt small business.

Where do small business owners stand?

Opinion polls
Of course, it depends who you ask. According to some polls, the majority of small business owners would support an increase:

In contrast, a CNNMoney-Manta survey found that 49% of small business owners opposed an increase. Also, some key small business organizations—NFIB and the National Small Business Association—say they’ve polled their members and found that they oppose any increase.

Reality check: Minimum wages are already higher
Regardless of what small business owners would or would not prefer, the majority of states have already increased their minimum rate to an amount higher than the current federal rate of $7.25 per hour. In 2014, the following locations have rates higher than the federal rate (amounts in parentheses are rates effective in 2015 and beyond):

  • Alaska: $7.75
  • Arizona: $7.90
  • California: $9.00 ($10 starting in 2016)
  • Connecticut: $8.70 ($9.15 in 2015; $9.60 in 2016; $10.10 in 2017)
  • Delaware: $7.75
  • D.C.: $9.50 ($10.50 in 2015; $11.50 in 2016)
  • Florida: $7.93
  • Hawaii: ($7.75 in 2015; $8.50 in 2016; $9.25 in 2017; $10.10 in 2018)
  • Illinois: $8.25
  • Maine: $7.50
  • Maryland: ($8.00 and $8.25 in 2015; $8.75 in 2016; $9.25 in 2017; $10.10 in 2018)
  • Massachusetts: $8.00 ($9 in 2015; $10 in 2016; $11 in 2017)
  • Michigan: $7.40; $8.15 on 9/1 ($8.50 in 2016; $8.90 in 2017; $9.25 in 2018)
  • Missouri: $7.50
  • Montana: $7.90
  • Nevada: $8.25
  • New Jersey: $8.25
  • New Mexico: $7.50
  • New York: $8.00 ($8.75 in 2015; $9 in 2016)
  • Ohio: $7.95
  • Oregon: $9.10
  • Rhode Island: $8 ($9 in 2015)
  • Vermont: $8.73 ($9.15 in 2015; $9.60 in 2016; $10 in 2017; $10.50 in 2018)
  • Washington: $9.32
  • West Virginia: ($8 in 2015; $8.75 in 2016)

Find more details about state minimum wage legislation from the NCSL.

Henry Ford model
In 1914, Henry Ford more than doubled the daily wage to $5 of workers in his Model T factories (he also cut the work day from 9 to 8 hours). He did this to reduce worker turnover (many could not take the monotony of the assembly line).

The increased wages actually saved the company money in rehiring and retraining costs. But many claim that there were two important byproducts of this action:

  • It created goodwill (his actions were reported worldwide)—this increased car sales.
  • It created consumers (his workers earned enough so they could afford to buy his cars).

One Forbes opinion piece says it’s “ridiculous” to apply the Ford model to the current McDonald’s controversy where workers are advocated for $15 per hour—will it enable workers to buy more burgers?

Keeping pace with inflation
If the minimum wage were adjusted annually for inflation, what would it be today? The federal $7.25 per hour rate took effect on July 24, 2009. Based on the BLS calculator, that rate would be $8.05. Clearly, any federal minimum wage increase should be tied to an inflation adjustment so the conversation on increases won’t have to be repeated every several years.

My opinion
I’m not opposed to the idea of a higher minimum wage. My issues with an increase relate to the overall struggle that small business owners face in rising prices: higher health insurance premiums, higher prices for the goods and services they use, and higher taxes. A discussion of an increase in the minimum wage should not be devoid of consideration about other additional costs faced by small business and how they can be expected to survive. A higher minimum wage only benefits a worker if there’s a job for him or her.

What’s Your Pay Scale for 2012?

Thursday, October 6th, 2011

Since employees are your most valuable assets, you naturally want to pay them well for their services. What you pay depends, of course, on how well your business is doing and on other factors.  As you’re planning for salary increases and hikes in pay rates for hourly workers next year, keep certain points in mind:

  • Minimum wage rates. Eight states have indicated that they are increasing their minimum wages on January 1, 2012: Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont, and Washington. Missouri and Nevada link their rates to inflation, so they, too, will likely increase their rates (even though they have not yet been announced). The hourly rates vary by state, with Washington at the high end at $9.04 per hour. The federal minimum wage rate, which is $7.25 per hour, remains unchanged for 2012; this rate applies in states with minimum wage rates at or below the federal level (i.e., the federal minimum wage supersedes the state rate if the state rate is lower than the federal rate). Find the minimum wage rate for your state through your state labor department or the U.S. Department of Labor (the 2012 rates have not yet been posted here).
  • Cost of living adjustments to salaries. It has been estimated that the cost of living adjustment needed for wages in 2012 to keep pace with inflation is about 3.5%.

Where necessary or desired, include compensation increases in your budget planning for 2012. You must meet minimum wage requirements. You are not obligated to give cost-of-living adjustments or other raises for salaried workers, but should consider doing so to retain valued employees. Recognize that pay increases will also boost your employment tax obligations and can also raise your cost of benefits, such as contributions to retirement plans. Be sure to look at the big picture!