Workers everywhere are demanding minimum wage to be increased to 15 dollars an hour. In New York State, this might soon be the case. Raising the minimum wage will allow people who work at fast food restaurants and local businesses to obtain an income with which to pay the rising cost of services and housing utilities. This increase in the minimum wage will also allow college graduates that have not yet landed a career to pay off their student debt. All of this of course is theoretical. What else could a dramatic increase in the minimum cause to you? Could it prove detrimental to increase the minimum wage?
I think that people have been caught up in thinking about how much higher their income would be once the wages are increased and they have not really taken the time to consider how this increase could destroy small businesses. Take for example a bodega owner that has 4 employees, one is being paid $7.15 an hour, the other two are being paid $10.60 an hour, and the last one is being paid $12 an hour. Now let’s assume that the person being paid the 12 dollars is working 38 hours a week, and each other worker is working 22 hours a week. This means that the owner of this store is paying a total of 1,082.4 dollars a week or roughly 4330 a month. These figures have not taken into account taxes, benefits, or even the income generated by the business to support these wages. Let’s now say that said store generates 10 thousand dollars a month. This means that the wages of the employees make up roughly 43% of the income generated by said business, leaving the owner with 5670 to replenish the items of the store, with whatever remaining being the income of the owner.
Now let’s say that the wages are increased to a 15 dollar minimum, without making any changes in the hours, the wages that the business is now paying its employees will be 6240, or 62% of the income generated by the store. What’s the real issue here?
The issue is that some businesses will have to either cut down the hours of their employees or flat out lay off some employees to remain functioning. With the example above, although very simple and loose, if the owner of the business wants to stay functioning as he was prior to the hike in wages, one of the options he has is to lay off two employees and have the two remaining employees work 38 hours a week, this would bring the total wages paid to the employees at 4560, which is only a 5% increase for the business. However, quality and functions of the business will suffer because of the reduced number of employees.
Without loss of generality, this example can be applied to many business, and as stated above it is a very simple example that does not take into account many other factors such as fluctuations in income for the business, insurance payments, or even the cost of the items that the store must replenish.
I think that before you jump on the fight for 15 bandwagon, take a second to think about what this will mean for you and your workplace as we might see more layoffs as a way of businesses to stay afloat.