There's been a lot of talk lately about the new minimum wage increase that is being mandated by the federal government. The mandated wage increase is the first in years, and was greeted by cheers from the AFL-CIO and other worker union groups.
But as the cheers begin to fade, here is the cold, hard, ugly truth about the minimum wage increase: It will mean unemployment for a lot of workers.
WHAT???? That's right. As a businessman myself, I can promise you that the new minimum wage will mean reduced hours and/or termination for those currently working for companies that pay their employees the minimum wage.
Why? Simple: Business owners will not sacrifice profit. Some can not cut 
anymore from the bottom line. They'll simply be forced to reduce their staff, juggle hours and duties, and get more out of the remaining workforce that will stay under their targeted payroll budget. That means handing out pink slips to workers they would otherwise love to employ.
Of course that's not a hard and fast rule for all businesses. There will be some businesses - many, in fact - that will absorb the hit and carry on with a slightly lower net profit as a result. But for the vast majority of businesses, that will not be possible.
It's not that business owners like myself don't want to pay their valued employees more. But there are so many costs factored into each employee (their wage, their benefits, employer taxes, etc.) that most cut the line pretty close.
Whenever government chooses to mandate how much a business will pay an employee, I believe that some think that the business owner are "getting what they deserve" or "paying their fair share". In reality, the business owner will adapt and shift his employee responsibilities and trim staff to stay on course for a profitable operation.
In reading this, that may sound cruel. Cold. Harsh. Too rigid. Unsympathetic.
Perhaps, but remember this: Business owners make sacrifices beyond what most non-entrepreneurs can imagine. The one thing that won't get sacrificed, whenever possible, is a reasonable profit for their efforts.
Even if that sometimes means having to lay-off a valued employee.
» What Exactly Is a "Pink Slip"? from BizCradle
I just did a post on one result of the new federal minimum wage increase: Laid-off employees.We refer to it as giving someone the "pink slip".What exactly is a pink slip, and how did we come to use that term... [Read More]
Tracked on: July 24, 2007 3:35 PM | Permalink to Trackback