State of Union

The issue I would like to address that I feel will directly affect business is the proposal to raise minimum wage to $10.10. Businesses have just endured a difficult recession and some are still trying to recover from these economic hardships. Small businesses tend to not have the same level of capital to fall back on as larger corporations and are likely to feel the sting of a wage increase at this level after fighting for their life to get through these past few years.

Overall businesses have had a lot of demand on their cash flow, and will have trouble handling this extra expense. The new “Affordable Care Act” will greatly increase the health care cost that businesses face in 2015. Business stimulus packages have recently expired such as the bonus depreciation packages. Now the next policy is to ask business to incur more cost with increased wages. This will also increase all the associated payroll expenses tied to wages such as the FICA tax, workers compensation, and FUTA to name a few. When you compound these expenses that businesses will face they will have to revert back to survival mode, which restricts spending and hampers research and development and the innovation that results.

We know from basic economics that to reduce something you increase the cost of it by taxing it or creating a floor. Following this thought process businesses will likely have to go back to a strategy of asking employees to take on more responsibilities by consolidating jobs and reducing staffing leaving unemployment as a continued problem. I also see this policy creating a high inflation rate that will increase the cost of doing business and likely reduce the purchasing power of those actually receiving this raise. Lastly minimum wage jobs aren’t meant to be careers.