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The impact of raising minimum wage

On Behalf of | Aug 16, 2016 | Wage And Hour Laws


As Californians look toward a future in which the minimum wage will be $15.00 an hour, many questions arise:

  • Will small businesses be able to stay afloat with increased payroll demands?
  • Will there be more workers chasing fewer jobs?
  • How will low-skilled workers be affected?

California has enacted legislation that will increase the minimum wage to $15.00 an hour gradually over a period of seven years. By 2022, a full-time employee who makes minimum wage will have an annual income of $30,000.00. Today, a full-time employee who makes minimum wage has an annual income of $20,000.00.

One thing is certain: Change is coming and both employers and employees will be affected. Let’s take a look at a few possible effects of the minimum wage increase.

More Automated Jobs

With higher minimum wage requirements, many businesses will struggle to maintain the same number of employees. As a result, businesses will look to job automation.

We have already seen signs of technology replacing live people:

  • Diners at restaurants ordering food from an iPad instead of a server
  • Shoppers using self-checkout lanes in supermarkets and other stores
  • Human telephone operators being replaced by automated telephone operators
  • Robot workers replacing assembly line workers, packagers, factory workers, warehouse stock checkers, etc.

As technology continues to advance – and as employers demand more lower-cost options – job automation will certainly be something we hear more about.

A Reduction In Full-Time Employees

With increased labor and healthcare costs, many employers will be cutting corners wherever they can.

In an attempt to minimize the number of full-time employees on the payroll, employers may hire part-time employees instead of full-time employees.

An increase in the minimum wage to $15.00 an hour will incentivize employers to reduce the number of full-time employees in blue collar jobs by utilizing employment agencies to fill their anticipated labor needs on a weekly basis.

Overtime Hours

The $15.00 an hour minimum wage rate will also significantly reduce the number of overtime hours available to workers. Employers will likely adjust their workforce hours to reduce the potential for employees who are making less than $10.00 an hour now from receiving $20.00 an hour in overtime pay.

It would not be surprising if the increase in minimum wage results in a reduction of the standard work week for many companies from 40 hours a week to 35 to avoid overtime expenses.

Increasing The Minimum Wage: Is It a Good or a Bad Thing?

Proponents of the legislation claim that the change will be good for individuals, families, and the economy. Opponents claim that the change will adversely affect low-skilled workers and result in job loss and higher prices on consumer goods.

As we gradually work toward the full implementation of the minimum wage law, much remains to be seen. The full financial impact on both employers and employees is yet unknown.

What are your thoughts on California’s minimum wage increase? Please share in the comments below.

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