Min Wage Increase May Have Mixed Financial Impact

One of the issues Congress expects to wrestle with in its lame duck session this week is the possibility of a minimum wage increase. Even though an increase in the minimum wage by $1 to $6.15/hour would help entry-level employees, the increase--occurring over a two-year period--may have limited impact on wages paid by most companies.

A tight labor market coupled with the higher wages already being received by most employees should result in little change to the bottom line for employers. Many employers who would normally be forced to grant a raise in pay will not experience any increase because young and recently-hired employees are already paid more money due to the shortage of qualified workers in the workforce.

The outlook isn't as rosy in some parts of the country (the south, where wages tend to be lower), and some employers who hire high numbers of young staff will be hit significantly by the increase. Take Domino's Pizza, for example, which estimates it has 20,000 entry-level, minimum wage employees. If the increase in the minimum wage is passed, the company may be forced to lay-off employees or raise prices to make up for the difference.

Another concern of companies is a ripple effect resulting from a minimum wage increase. If employees at the lower end of the pay scale receive increases, similar increases may have to be offered throughout the company to achieve parity among the ranks of all employees.

In the end, of course, the consumer will bear the burden of the increase, as companies pass additional costs on to the public in the form of higher prices for their products and services.

You may like these other stories...

For the first time since 2006, more than 50 percent of CFOs believe the US economy will show signs of improvement over a six-month span rather than remain the same or worsen, according to a new study from Chicago-based...
By Jason Bramwell, Staff Writer CPAs in New Jersey, New York, and Pennsylvania believe economic conditions in the United States will likely be the same one year from now, and while they predict higher business revenues...
By Jason Bramwell Managers in accounting, finance, and IT are cautiously optimistic about their hiring plans for the fourth quarter of 2013, according to a new hiring outlook survey from staffing firm Brilliant. ...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.