There is much debate about minimum wage earnings and the potential of a federal increase. Whether you believe it should or should not be raised at the federal level, the fact is that it has already been raised in many states. Florida, for example, decided to increase their minimum wage from $8.10 per hour to $8.25 per hour. While this is admittedly a small increase, it still has the potential to impact business owners. A minimum wage increase always has both positive and negative impacts and we will explore each of these in this article.
- If your company has a fixed compensation budget, a rise in the minimum wage might result in more layoffs or decreased hiring, leaving you with the shortage of qualified workers.
- You may be forced to hire fewer employees in entry-level positions, which are necessary for people to start a new career. This impacts the overall economy, as business owners already struggle to find skilled workers.
- A minimum wage increase produces an incentive for business owners to consider investing in automated processes, technology, and machinery to enhance productivity, rather than using human resources. You may find yourself turning to more high-tech solutions to fill the gaps.
- Businesses are more likely to outsource work to countries where the minimum wage is lower. It is estimated that one-third of the US workforce is currently working from remote locations. As this trend grows, employers may become more comfortable with the idea of an off-site workforce and seek cheaper distant labor in other countries.
- Companies may need to pass on the cost to customers. Prices could be increased to offset higher costs of labor.
- For small businesses that may already be struggling financially, the owner/operators will likely take on more day-to-day responsibilities to avoid the higher wage costs. This leaves less time for innovation and business development.
- Wages for higher-paid workers might be lowered, and annual salary raises might need to be decreased to compensate for the minimum wage increase. This could result in losing highly qualified employees.
- The most commonly-discussed favorable impact of raising the minimum wage is the fact that people will have more money to spend, thereby stimulating the local economy. This could help small-business owners in the area.
- Increased employee morale is another positive effect of raising the minimum wage. Happier employees provide better services for your customers, which in turn means increased business. An optimistic workplace can make a big difference.
- Many of today's customers tend to shop their values. This means they spend money with businesses that support social causes they value, and they punish companies that do not support these causes through boycotts and negative social media postings. By openly supporting a minimum wage increase, you can attract new customers who see value in rewarding businesses that pay living wages. This is especially true if your demographic includes the millennials and other younger generations. They tend to be very socially conscious and spend their money accordingly.
Florida has a robust service industry—one of the industries that is usually immediately impacted by minimum wage increases. Because the current raise is very small, many do not expect the increase to have a negative effect on this important industry. However, a larger increase like many are pushing for in Florida and other states, could have a tremendous impact on the service industry in Florida, and in turn, the overall economy in this state. There are studies being conducted in cities and states all over the country that have adopted much higher minimum wage laws ($12 or $15 per hour, for example), and that data will certainly be used when evaluating the potential negative impacts of a larger minimum wage increase in Florida.
Whether you agree or disagree with the need for a minimum wage raise, it is bound to impact your business in some way. Even a minimal increase of $.15 per hour, like we are seeing in Florida, can have both positive and negative effects on business owners. By understanding the potential impacts, you can more easily plan for necessary changes.