A huge talking point with labor and politicians has been the debate of whether raising the minimum wage to fifteen dollars an hour is a good idea.
On one side, many argue that raising the minimum wage would help the poor and those with fewer skills make a living.
Others believe that the increased wage would actually hurt the poor and less skilled by decreasing job opportunities.
Seattle is a city that has already approved the gradual increase of the minimum wage from seven twenty five an hour to fifteen dollars an hour by the year 2017.
Nationwide, the restaurant industry suffered a decline as a result of the Great Recession of 2009. In areas that are not mandated to the wage increase the industry is recovering.
However, this is not the case in Seattle, and the greatest effect on said industry is in areas that are required to pay more than seven twenty five an hour.
The state of Washington’s overall job creation was 3.2% in service industry jobs.
According to one report, the minimum wage increase has already stifled the restaurant industry’s available jobs by a creating a loss of one thousand jobs.
What many of the general public may not understand is the particular beast that is the restaurant industry.
Wait staff in most states are paid two dollars and thirteen cents an hour. Employers depend on the amount of tips taken in by the server to make up the difference to seven twenty five an hour. If the server does not make enough tips to give them minimum wage, the restaurant’s payroll department is required by law to “gross up” the server’s pay. The employer pays the amount necessary to comply with minimum wage law.
Every employer, regardless of industry, is required to take out Federal income taxes, FICA and Medicare from each employee’s check. The employer is also required to match the total amount of FICA and Medicare that is deducted from the staffer’s pay. The employer is mandated by law to deposit this amount into an account that is controlled by the IRS.
FICA and Medicare is 7.65% of all wages up to 113,700 dollars per year, with employer matching the amount to arrive at 15.30% for social security retirement benefits. Wages over $113,700 are not subject to FICA or Medicare tax.
The employer also is required to pay quarterly federal and state unemployment tax.
The rate of state unemployment varies by state, but the federal tax is 6% on the first seven thousand dollars in wages. It decreases after reaching that threshold. The employee is not required to pay any part of these taxes. The responsibility of this cost rests entirely on the employer.
Perhaps many that support the increase in the minimum wage do not understand the obligation of the employer to pay so much out of pocket.
Effectively doubling the out of pocket expense to a small business could sound the death knell. That additional money paid out could be part or all of the profit for a month. Being that small business accounts for the majority of created jobs, it doesn’t take a huge amount of money to change the picture from black to red. Small business has to have a certain amount of cash flow in order to maintain the business. Additionally, these small businesses owners deserve something for their trouble and return on their investment. This return would be some kind of a profit. It is not an unreasonable expectation.
The minimum wage was signed into law by President Roosevelt in 1938. It set the minimum wage to twenty five cents an hour. It did cause an initial outrage within the business community, but by then it was a Federal obligation to the worker. However, it was meant to bring some consistency to the job market, it was not meant to be a career niche. It is a starting point. In most cases, people advance in the business or move onto bigger and better things.
The issue of minimum wage is more complicated than deciding to double it or not. All of the systems that payroll taxes support could use an overhaul in order to maintain society and those that work within it.