The down side of raised wages
Millions of minimum wage earners across the United States have circled July 24th on their calendars, marking the day a mandated pay hike will bump up their hourly wages to $7.25 from $6.55.
The move is the latest in a three-part pay increase approved by Congress in 2007 in a bid to fatten up the paychecks of the country’s lowest earners and “improve the lives of working families across the nation,” the Department of Labor said.
But many small business owners are left asking, “What improvement?”
“For the business owner who hires a lot of people, I see prices going up and doors closing,” a sandwich franchise owner told the Indiana’s Journal and Courier newspaper.
Indeed, reports are already popping up about worried business owners forced to pass on higher costs to their customers, slash shifts, and in some cases, reduce headcount when the burden of higher wages catches up with them.
Meanwhile, critics are taking aim at the pay hike’s poor timing. With an unemployment rate at a dismal 9.5%, many are wondering how much more the bruised labor market can take.
But there is an upside, at least according to analysts at liberal think-tank Economic Policy Institute. The EPI says the wage increase will give consumer spending a much-needed boost and prevent the worst recession in decades from spiraling out of control.
Will the mandated minimum wage hike affect your business? If so, how are you planning to manage the increased costs?