PAYDAY Workforce Solutions Blog

Minimum Wage Increase Forcing Businesses to Raise Prices

On Jul 11, 2014

When California’s first minimum wage increase in six years takes effect in July 2014, something else will be increased too – prices. California business owners like Myers Building Service owner Tom Myers say they’ll have to charge customers more to pay for the minimum wage hike.

Business owners won’t give up part of profits to pay higher wage because in most cases, they’re not in a position to be able to do that and stay open. They’ll pass the cost on to customers, who may in turn go elsewhere if they can find a less expensive alternative.

Current and Future Worries

Business owners aren’t just worried about this year’s minimum wage increase. They are worried about future increases and how they’ll be able to meet them in their business operations. California’s minimum wage is set to increase to $10 per hour next year.

Workers are in favor of the wage increases. Fast food workers all over the world want $15 an hour and the right to unionize. But they don’t realize how an increase in minimum wage may jeopardize their jobs.

Employers may do any of several things in order to pay for minimum wage increases, including cutting back on schedules, reducing the workforce, hiring fewer new and replacement workers, raising prices and using cheaper materials and supplies and risk losing customers,.

Where Will the Money Come From?

In reality, the money to pay higher minimum wages has to come from somewhere. It likely can’t come out of company profits or executive salaries, and so will come from workers and customers.

When people understand that businesses don’t just pay for minimum wage increases with thin air, but from reduction in hours, hiring, and jobs and increases, they aren’t as quick to support it.

A recent Reason-Rupe Poll proved this. When participants were asked if they supported raising the minimum wage, 67 percent said yes. But when asked if they’d support a minimum wage increase if it meant employers would layoff workers or hire fewer new workers, only 39 percent said yes.

It’s Not All Bad

Although the minimum wage increases are causing concern about how employers will pay for them, it’s not all bad news. Some employers, like Ikea, have found a way to raise wages without it affecting jobs or prices - they’ve cut costs and can afford to increase pay. Other employers who have plans to raise their employee wages, including the Gap and Old Navy, are enjoying increased job applicants because of it.

For more information take a look at our previous minimum wage blog posts:

Contact PAYDAY for more assitance in regards businesses to increase prices

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