“The National Minimum Wage remains one of the most important new
rights introduced by this Government. Employers who don’t pay the
minimum wage are not only cheating workers, they’re undercutting
honest businesses.” (UK Government News 2008, January 10th).
If you believe it is fair to increase the value of your product which somehow contributes into the rate of cost living. Then it must be fair enough to increase the minimum wage to $15 which would somehow help workers to at least afford the damn cost of living build-up by you and your products.
If you consider adjusted inflation, then the current minimum wage is at the same level as it used to be in 1956 and reached its maximum inflation-adjusted value in 1968, when it was worth $10.89 in today’s dollars, explained Aaron Pacitti who is an assistant professor of economics at Siena College.
Surprisingly, if at all 1968 minimum wage would have grown at the same rate as the cost of living, it would be $16 today. And if it grew with worker’s productivity, the minimum wage would be $22 today, triple its current level. Though it’s going to indeed be time for a raise, business leaders are wary of an excessive amount of change, too fast.
- 1 How has the $15 minimum wage impacted business overall?
- 1.1 What are the challenges related to meeting obligations under these wage laws?
- 1.2 What are the benefits of a higher minimum wage for your business?
- 1.3 What are the various measures which can be taken for cost-saving?
How has the $15 minimum wage impacted business overall?
According to a survey, around 57 percent of small business owners say these minimum wage increase will have no impact on their business in 2020, which indicates that they can absorb this cost of the wage increase and sustain any loss in profits and will find ways to raise revenue to compensate for the increase on their balance sheet.
Some businesses have nothing to worry about because many were always paying their workers above the minimum wage even before the change was made.The risk of a wage increase is that it will be set too far above the hourly rate that employers can afford to pay their workers, leading them to lay off workers if they can’t offset that cost in another way.
Small businesses usually have a smaller profit margin and limited ways to reallocate funds if their business model suddenly changes.
Increase in wage can have severe effects for little businesses such as:
- An increase in payroll expenses often requires small business owners to raise consumer prices on goods and services or to reduce business costs.
- Payroll is considered as the highest expense for most of the small businesses, an increase in the minimum wage may result in small businesses laying off workers.
- The layoff of workers is typically considered because of the first option because consumers may react negatively to a rise in the product price.
What are the benefits of a higher minimum wage for your business?
No one wants expenses to go up, but business owners understand the value of making investments in an important asset. A small business has no greater asset than the people who work for them, so their wages should be viewed as an investment.
Here are the benefits associated with a higher minimum wage for your business.
Increases worker’s productivity:
According to research employee morale and work ethic increases when employees believe they are paid a fair wage. Economists have also linked higher wages to raised physical and psychological state and reduced “decision fatigue,” resulting in higher productivity.
Higher wages cause a lower turnover rate, leading to reduced recruiting and training costs. An analysis by the middle for American Progress estimates that the value of replacing low-wage workers is adequate to about 16 percent of the employee’s annual salary. A 2012 study by Arin Dube, Michael Reich, and William Lester concluded that an increase in minimum wage can reduce turnover substantially, leading to savings in turnover costs.
When workers earn higher wages they’re less absent from work, resulting in increased productivity. A 2010 paper from economists Curtis Simon and Laura Bucilia concluded that higher minimum wages are related to lower rates of absenteeism for reasons aside from illness.
If you plan accordingly, the minimum wage increase wouldn’t be an obstacle; they can instead be a benefit for both your business and your employees.
What are the various measures which can be taken for cost-saving?
Here is some measure for cost-saving due to increase in minimum high wage:
You can consider energy consumption, surplus inventory, and service contracts. Cutting extraneous expenses will help you not only absorb the new labor cost but also to streamline business operations.
If you find yourself in a market where you are competitive on prices, consider increasing what you charge. But before raising prices, be sure to communicate with your customers to keep them aware of the same. Also, examine what your competitors charge to ensure your customers don’t flee for more cost-effective alternatives. You have to be very careful while increasing the price of your products but if you have the room to do it, coupling price increase with modest budget cuts could free up some capital.
Reduce working hours:
If you find it difficult to offset the minimum wage increase, you can also consider reducing your operating hours. Identify when most of your revenue comes through versus slower times of the day and adjust your operating hour accordingly to save money.
A small piece of advice to those who are still not able to take this hit positively, but firstly I would like to highlight the research report on the impact of the previous hike in minimum wages.
From 1998 to 2001, the number of small business establishments grew at a rate of 3.1% in states with higher minimum wages, compared with a rate of 1.6% in states with lower minimum wages.
Employment grew 1.5% more quickly in states with higher minimum wages.
Annual payroll and average payroll per worker increased more quickly in states with higher minimum wages.
I would suggest you take this measure positively because I believe you would like to have those workers who work efficiently and effectively which is highlighted in the benefits mentioned earlier.
Secondly wouldn’t you wish to have a team that is devoted to your business and not working just for the sake of working? As it is said that food can make man happy, in the same way, money into pockets can make a worker happy and devoted to your company.