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Raising Minimum Wage and Implications for Employers

What's going on with minimum wage? Employers must be aware that there is somewhat of a discrepancy between the federal minimum wage and the cost of living in 2016. This past Sunday, July 24, was the seventh year that the federal minimum wage has remained the same, even with the increased cost of daily expenses. The cost of living has risen 12% since 2009, leaving the actual value of minimum wage crashing to the ground. This is a huge step down from the days before Reagan, when the minimum wage started to fall. In 1968 minimum wage was at its highest. If we look at the dive from that peak, the value has dropped more than 25%.

Even though 10 presidents have opted to raise the federal minimum wage since President Franklin Roosevelt, many states have seen the need to petition for higher wages. A total of 18 states, plus the District of Columbia have taken steps to have the minimum wage raised, in addition to Obama calling for an increase in the beginning of 2013.

Most Americans support this action; in fact, many companies, small business and enterprises alike, have raised the minimum wage on their own accord within their establishments. Big businesses such as Walmart, T.J.Maxx and Ikea are some of the worldwide names that are supporting this change. The demographic that this increase would affect most are adults over 20 years of age, and more than half of those adults are women.

So what is holding back this change? Many economists predict that, like the additional expense of anything, it will lead to people purchasing less of that particular thing. A great example of this economic disturbance is what has just happened in Seattle's labor market.

Seattle's labor market recently raised the minimum wage to $15 per hour. The trend since this increase in wages shows that, while there is still steady growth in both employment rate and wage increase, the employment rate and hours are climbing less than the pay increase for low-wage workers. The fear of economists is that the gap between those two numbers will steadily widen until there is a job crisis for low-skill workers.

The discrepancy in growth is the pressing issue that economists agree will not work in this idealist vision of minimum wage. For employers, a minimum wage increase could seriously affect the lower levels of their company and their low-skill employment positions that help them thrive on the ground level. If cuts need to made in one area to compensate for the minimum wage change, does it even make sense to support this change, or is it more of an ethical issue as an employer to pay "fair" wages?

To learn more about the issues concerning minimum wage, visit the DOL website. If you have questions about minimum wage or other employment-related matters, please contact Danz & Kronengold, P.L. at www.danzlaw.net.

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