BY: Brian St. Louis
It was recently announced that the US Government announced that the new minimum wage for federal employees would be increased to $10.10, up from $7.25. States like Connecticut, which are primarily under Democratic rule, have followed suit in raising their minimum wage as well.
While on the surface, this would seem like a terrific help for those on the lower end of the wage earning scale, in the long run it may very well hurt those most who it is supposed to be, “helping” and could do further damage to an already fragile national economy.
When smaller companies are forced to pay out more money to their employees – increase their expenses – without increasing their revenue, you put a severe burden on those companies to remain profitable – the engine that drives employment – and that has led researchers to anticipate that in an economy where small businesses are hanging on for dear life, that this extra burden will lead to a large amount of job loss be it in total employment or cut backs in hours available to workers to earn money.
Follow this out to its logical conclusion and with workers either losing jobs or having their hours cut back, that means there’s more need for government assistance, less money in the economy, less disposable income to spend and as a result all sales will drop which leads to further economic hardship for the engine that drives the economy, small business. The drop in sales will lead to higher prices as increased costs almost always get passed onto the consumer. Those higher costs lead to inflation and that in turn starts a spiral that will just continue to drag the economy down which will directly hurt the very workers this, “plan” was supposed to help.
The CEO of McDonald’s, Don Thompson, recently said in an interview that he supported the minimum wage hike stating that McDonald’s has always been in support of paying its employees above the minimum wage, which he feels is too low already.
At one point, Thompson was asked how McDonald’s would fare financially with the upcoming wage hike, “McDonald’s will be fine,” he said. “We’ll manage through whatever the additional cost implications are.”
The truth is that McDonald’s will be fine. They will raise their costs for a burger and fries and people will continue to buy them. The other reason McDonald’s will be fine is they have the financial resources to withstand the added costs. In fact, if as Thompson indicates, they’re already paying that, then they just won’t increase their employee’s wages and will just keep on going.
But for smaller companies, they are often not equipped to handle such a sudden increase in expenses. It’s speculated that because of the minimum wage increase, hundreds of small businesses will be forced out of business altogether or at the very least, suffer very severely financially.
As executive recruiters, Crossroad Consulting is following this situation closely. Crossroads Consulting’s owner, Mitch Beck said, “We support our candidates getting the best possible positions at the best possible wages. We also monitor these kinds of things closely as the vast majority of our client companies are small and mid-sized companies and this kind of thing will hurt them and that concerns us as well. Our clients have told us that while this will hurt them, they are not anticipating any great losses to any of the kinds of positions they would be going out to us for. So that’s at least good news in that regard.”
If you are looking for new employment, Crossroads Consulting has over 50 job opportunities available on their website which you can find by clicking HERE. Be sure to also take a look at their resume evaluation service as well.