In his State of the Union speech, President Obama addressed the need to help the middle-class and reports are starting to surface that new minimum wage laws will be addressed this summer on Capitol Hill. Now is the time to take a more in-depth look at how these minimum wage laws might affect systems integrators.
As of now the federal minimum wage is $7.25 an hour. 19 states and the District of Columbia have minimum wages above that; 10 states are below or have no minimum wage; and the rest remain at the federal wage. During the 2013 state legislative sessions, 33 states have introduced minimum wage legislation. As the economy is beginning to stabilize, is now the time to increase the rates?
Additionally, 5 bills have been introduced at the federal level, including one by Senator Harkin (D-IA) to raise the federal minimum wage to $10.10 (S. 460). This is where the details matter – the Fair Minimum Wage Act of 2013 includes “indexing” of minimum wages so that after it reaches $10.10, it would increase to adjust to cost of living increases. This would place a huge burden on small businesses.
Experts have proven that raising the minimum wage has not truly affected unemployment rates (one of the biggest concerns for raising the minimum wage), but would argue that the minimum wage is currently at a good rate to differentiate between skilled and un-skilled labor. If you go too much above that rate, then you will see unemployment (especially now when more college graduates are taking minimum wage jobs, just to have a job).
Here are your basic pros and cons for raising the minimum wage:
• Provides an incentive for un-skilled workers to get the training needed for higher paying jobs
• Decreases poverty levels, therefore decreasing government funding on low-income programs
• Puts more tax money back into the system with more people working
• Job security – in tough economic times, those with lower paying jobs are more than likely to keep their jobs so executives don’t have to hire and train new employees
• Unemployment increases among all types of workers – skilled or un-skilled (therefore increasing the poverty level)
• Decreases job growth as small businesses may not be able to afford the new minimum wage, putting more burden on small staffs
• Increased pricing in goods and services (to cover labor costs)
• Small businesses will struggle to pay employees varying rates in order to compensate for increased wages
You could argue the pros and cons are quite subjective. For example, only those motivated to get jobs will go get the training. Others have found it’s better to live off of unemployment than it is to go and actively look for a job – in some cases they might make more money on unemployment than taking a minimum wage job. Only if more people are working will more money be put back into the government and save the feds from funding low-income programs.
This opens a bigger issue: training. Perhaps this is a solution to getting more people in skilled jobs – provide more training programs through federal programs, and ones that aren’t controlled by the Unions. There are some efforts being discussed on Capitol Hill to address this issue as well, and industry support and programs, such as ESPA, could provide great opportunities to put more skilled labor in the workforce, giving more people money to spend or save, therefore helping the economy. More and more community colleges and technical training schools are becoming relevant once again as students are realizing the outrageous costs of getting a higher education to work in a minimum wage job.
The fact is that there are both pros and cons to the minimum wage – but more has to be done beyond just raising the minimum wage to incentivize growth in employment and the economy.