Owners Cutting Staff, Hours In Efforts To Absorb Rising Labor Costs
As labor costs increase across the US due to rising minimum wages, small business owners are increasingly forced to make difficult decisions to absorb rising expenses. The AP points out that part of the difficulty employers will have in adjusting to rising minimum wages is that Medicare and Social Security taxes, along with workers’ compensation insurance, are all linked to employee wages, and thus all likely to climb as well. The AP notes three examples of the ways businesses are approaching these rising labor costs. In one example, the small Western restaurant franchise Dog Haus is considering having customers grab their meals from the counter at two locations in order to reduce staff levels and costs. Some owners are adjusting to get ahead of expected wage increases by boosting wages right now. For example, Washington, DC-based &pizza owner Michael Lastoria is planning to boost his employees’ wages to up to $15 per hour, which will be above the city’s planned minimum wage of $11.50. All employees, including new staff, will earn at least $12 by the July 1 date the city implements its planned wage hike. Still, Lastoria admits that his “company can absorb the higher labor costs because it has solid revenue growth.” In a third example of how small businesses are adjusting to wage increases, the owner of three Tropical Smoothie locations in the New York City area has boosted customer prices by around 30% since the minimum wage increased state- and city-wide.
What This Means For Small Businesses
The three approaches of small franchise owners to rising minimum wages highlight the creative, entrepreneurial spirit of America’s job creators. However, small businesses of all sizes in all sectors will increasingly find it hard to absorb the rising costs of labor as government-mandated minimum wages increase.
Additional Reading
NFIB previously reported on some of the negative consequences of wage hikes across the US.
Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.
