| Minimum wage drives down demand just as artificially forcing a lower price for something increases demand. Minimum wage is NOT just money. If an employer is required to provide benefits, those are also a form of minimum wage increase, but one that does not show up the same way as cash income. ALWAYS remember: All benefits are paid for by reducing wages one way or another. The effect of benefits on minimum wage is actually BIGGER than the current hourly minimum wage. Consider health insurance. Employers are required to pay for insurance for their employees working more than 30 hours. They cannot force the employee to pay more than around 10% of the cost AND the insurance must cover at least 60% of the costs. Average health insurance costs are (according to a quick google) $440 per month which leaves the employer paying $400 each month for health insurance per full-time employee (that's a $2.50/hr minimum wage increase for all full-time employees). This leaves four options. The first is to raise prices across the board (hardly feasible). The second is to hire a ton of 29 hour "part-time" employees, but there are still hidden per-employee costs like extra unemployment, worker's comp, training, scheduling issues, etc. The third is to work employees 45-50 hours per week because the overtime cost in that range is still less than the cost of 1.5 time is still cheaper than all the fixed costs for bringing in another employee. The final option (probably what we see here) is to use the other options until inflation allows you to recover from the pay issue, but with cash benefits not recovering in order to pay for all the other benefits the employee is buying. These same things apply to all the other benefits ranging from vacation to 401k. This also ties into 1099 negotiation. DO NOT negotiate with the cost of employment salary in mind. Instead, negotiate with the total cost of benefits in mind. Ask what the total cost of ownership for an employee would be. You need to be compensated for that $400 per month health insurance. You need to be compensated for that 3-4 weeks of vacation you can't take. You need to be compensated for losing 1 year of unemployment benefits if your job disappears. You need to be compensated for that 401k match. Especially don't forget that extra 7.5% you need for the other half of social security. I worked for a company a few years ago for a while before finding out their cost to hire me as a contractor was around 100k per year while an employee with the same position would be paid 90k in cash and another 80k in benefits. That made a huge difference the next time I sat down at the negotiation table. |