MINIMUM WAGE INCREASE; THE GOOD, BAD & THE EXPENSIVE

Written by Darius Khayat // June 27, 2014 // Articles

If you are a small business owner, you may not be aware that the minimum wage in California will increase to $9.00 per hour come July 1.  I have had several conversations with business clients recently who were unaware of the pending increase.  While the increased pay rate will not affect most of my business clients, the owners of businesses that will be impacted report varying degrees of support or criticism for the change.  As food for thought, here are some of the pros and cons of the change I hear commented on more frequently:

PROS:

Provides more money to low income workers relieving to some degree claims for public benefits. 

Statistically, lower income workers tend to spend wage increases thereby adding to the economy where higher wage earners tend to save additional earnings resulting from a wage increase.  Higher demand for products and services stimulates the economy and adds jobs.

Minimum wage increases shrink the gap between low-wage and higher-paid workers, increasing morale and better working conditions.

Increased wages reduce job turnover and therefore add to businesses’ bottom lines in the way of reduced training costs.   

CONS:

Mandatory wage increases result in job losses. As labor costs are a significant component in most business budgets, increases could actually cause job cuts thereby having the opposite intended effect. 

Increased labor costs result in lower business profits. Businesses will have less money to reinvest for business growth and job creation.

The added costs to business of the implementation of mandatory wage increases will be passed through to the consumer or end user anyway thereby having a negative effect on the economy  and decrease demand for products and services.

Whichever side of the argument you are on, one thing is for sure; if your business includes positions paid at minimum wage, that rate will most definitely be increasing come July 1.  Are you a business owner looking for a business law attorney to help guide you through a specific issue or just need general counsel to help your business grow and prosper?  Give our office a call, we are here to help!

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