Higher minimum wage means higher costs for business owners

The political pressure to enact a $15 federal minimum wage is growing stronger. It’s the stuff of nightmares for business owners, but it may yet become a reality. New York has already passed legislation, with the enthusiastic support of Gov. Andrew Cuomo, to raise the wage bar for fast food workers to $15. It seems inevitable that figure will soon carry the day for all New York workers.

The progressive bastions of San Francisco, Los Angeles, and Seattle are also getting ready to enact a $15 minimum wage.

As goes New York, so goes the country?

President Obama is already committed to a $12 federal minimum wage. His time remaining in office is short, but if Hillary Clinton gets elected next year you can be sure that will add a tremendous amount of oxygen to this dubious movement. (And forget it if Bernie Sanders gets in, but don’t worry, that’s very unlikely to happen.)

Organized labor is already using these early successes to push for an even higher minimum wage: $16.87. Even if highly unlikely to succeed, this “living wage” movement will make it that much easier to get a $15 minimum in place.

Nightmares aside, smart business owners with employees earning below $15 an hour need to plan now. This is especially true for fast food franchisers and other food service businesses where the $15 movement has the most wind at its back.

Besides the direct costs of a government mandated wage increase to employees, business owners may shoulder the burden of higher indirect costs, such as higher premiums for worker’s compensation insurance. It stands to reason that higher wages mean higher payouts for on-the-job injuries, which will put pressure on premiums.

Underwriters will be watching this movement very closely, as indemnity benefits represent about 40% of worker’s compensation claim costs and are generally based on two-thirds of a worker’s average weekly wage.

My team at The WorkPlace Solution  is keeping a close watch on the minimum wage movement and has the necessary expertise to help business owners control risk management expenses. Talk to us today and learn how we can help protect your interests, regardless of where the minimum wage political football lands.


Dave Sinclair, CEO The WorkPlace Solution


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About the author

David Sinclair is the CEO of The WorkPlace Solutions and Sinclair Risk & Financial Management.

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