Raising the Minimum Wage Will…

In Accounting & Finances, Business, Human Resources on August 15, 2014 by Sufen Wang

Lead to Job Loss and Small Business Closures!

wageThe raising of the minimum wage to $15.00 has been in the news a lot lately and I just have to put in my two cents on this matter. For reasons unknown, the media and the White House are not addressing the following issues when promoting a raise in the minimum wage:
1 – For every payroll dollar the employer dishes out, at least another 12 cents in out-of-pocket payroll expenses rides on that dollar’s coat tail. The employer has to match the employee’s Social Security and Medicare contribution, state employee training tax, state unemployment tax, and federal unemployment tax.
paycheck22 – For every employee hired on payroll, the employer has to pay insurance coverage accordingly. Worker’s Compensation Insurance and General Liability Insurance are both calculated based on gross payroll dollars, not to mention the now-mandated Health Insurance coverage.
3 – For every employee hired on payroll, the employer has to pay for additional office space, office supplies, computer and/or tool usage, and utilities.
The above are just a few costs of having an employee on payroll. Since our great nation is made up of small businesses, raising the minimum wage to $15.00 will force Mom-N-Pop shops to lay off employees, cut back employee hours, or worse, shut down all together.
hardware0908I have a client who has owned a small hardware store for over 40 years. The most he can afford to pay his warehouse staff is between $10 to $13 hourly rates. And even with these rates, oftentimes when sales are slow, he will forfeit his paycheck to cover his employees – just so he can keep his staff in place.
closedforbusinessFast food places will be especially problematic. 99% of fast food restaurants are franchised and the franchisee does not make the millions mentioned in the media (such as the CEO of McDonald’s corporation). These franchisees pay heavy franchise fees based upon their gross sales – before any expenses and taxes. If the minimum wage is increased to $15/hour, they will have to cut down on staff, or worse, raise food prices. Pretty soon, fast food prices will be the same as a sit-down meal at your corner cafe; no more dollar-menus! The domino effect from raising the minimum wage to $15 is very scary and is a reality that this nation cannot handle. It will cause unemployment to rise and businesses to shut down.
fastfoodMy first job was flipping burgers at a video arcade in Downtown Los Angeles. I earned $1.40 an hour (lower than the mandated $2.00 an hour). However, I learned a lot of basic skills from that minimum wage job: how to take orders, how to follow orders, how to handle cash transactions, how to give good customer service, and how to clean up efficiently. I also knew that this burger-flipping job was not the final stop in my career.
The minimum wage law was initially put in place to protect and prevent any abuse in the workplace. It was not intended for an individual to stay at a minimum wage job and wait for the wages to increase, to be concurrent with the cost of living.
A minimum wage job is just a pit-stop along the career trip: a short pause for a worker to gather his bearings and acquire the skills needed to move forward to a better job, the next pit-stop, and so on and so forth. I picked up speed in the various trades I learned, as a burger-flipper and at other small part-time jobs, and I kept getting better and better at each pit-stop along my life track. And for each pit-stop along the way, I accumulated different useful skills to further my career. I have never thought about staying put at one job and waiting for the wages to rise to my liking. 
Laissez-faireThe job market should be Laissez-faire, where supply and demand between private parties are free from government restrictions, tariffs, and subsidies, with only enough regulations to protect property rights. The market should be free to satisfy the supply and demand solely dependent on the current economic environment.
In summary, the minimum wage is not designed to feed a family of four. It is supposed to get the market to a starting point – the key word being “starting.” It is supposed to help an individual gain footing for employment, and then he should move onward and forward. It is not designed for an individual to stay put, and expect the minimum wage earning to keep up with his standard of living and family expansion, as he moves through his life cycle. It is, after all, called “Minimum Wage” not “Maximum Wage.”
Sufen Wang, M.S.Accountancy
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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