Raising Minimum Wage Hurts the 99%

27 03 2016

There’s a tentative agreement in place to raise the CA Minimum Wage from $10/hr to $15/hr, a fifty percent (50%) increase in a wage that is intended to be the minimum amount an employer will pay for entry level or non-skilled services rendered. What will be the immediate and long term effect on consumers, small business and the overall state of the California economy?tax map

Minimum Wage Effect on California Business – First, let’s explore what the increase means to the employer. When an employer pays a full time employee, she pays out an hourly wage that has been burdened to include the costs of social security tax (FICA), Federal Unemployment Tax (FUTA), State Unemployment Tax, Medicare Tax, CA disability insurance, employer’s payroll tax, and the allocation of reserves for paid holidays, paid time off, state mandated paid sick and family leave. For this example, I am not including the costs of overhead that a company has to pay in order to provide its services; overhead costs can fluctuate quite a bit depending on the service or product the company provides. So, for an employee to be paid $15/hour, it actually costs the company approximately $19/hr just for the labor costs alone. Compare that to the company paying $10/hr a burdened hourly rate of $12.67/hr., also a 50% increase in labor costs. This means any labor-intensive business will experience a 50% increase in labor costs alone. However, the increased costs don’t stop there.                                                                                      Read the rest of this entry »

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