At Work

Implications Of Raising The Minimum Wage

As more states, even cites raise the minimum wage, employers must with cope with the additional cost. Here is some insight as to what might happen. Results are based on a survey conducted by Aon. 

As is shown below, everything has consequences. In some cases there may be no net gain for workers if hours at work are reduced. Also, raising the minimum wage also increases other costs like all federal and state payroll taxes, leave and vacation costs and possibly benefit costs related to compensation. 

Impact on Employees and Consumers 

Whether organizations decide to voluntarily increase minimum wage, or wait for the government to put forth and pass a law, according to Aon, if minimum wage increases, the way compensation is administered will be impacted across the organization. Surprisingly, 49 percent of organizations reported they will adjust only those currently at minimum wage. Just 33 percent of employers say they would adjust those currently at minimum wage, as well as the positions above to continue to appropriately differentiate between levels, and minimize compression.

“Regardless of their approach, it is clear organizations will be faced with the challenge of having to counterbalance for the additional fixed costs that increasing wages will incur,” said Abosch. “What organizations will choose to do will vary, but employees and consumers will likely feel the greatest impact. Nearly half (47 percent) of the actions organizations are actively considering to offset increased costs may actually undermine the value that an increased minimum wage was supposed to deliver to low income workers.”

When asked how organizations are dealing with the cost impact resulting from increases in minimum wage, most responses revealed that organizations will push the burden down to employees by reducing or eliminating overtime (36 percent) or increasing prices (30 percent) for consumers.



Categories: At Work

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1 reply »

  1. I love it. When I worked for a Fortune 100 corporation, I averaged 60+ hours of work a week for 25+ years (including times I was supposedly on vacation or observing a holiday).

    So, when people state that they will be lowering headcount, hiring more part time employees, redefining work, and reducing overtime worked, all that means to me is that: (1) The salaried exempt individuals already earning in excess of the new minimum wage will be taking on added burdens, (2) Those who are shutting down or relocating operations have already done so and are no longer around to answer survey questions, or (3) Those businesses and new jobs that might have been created will never be around to answer survey questions.


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