Florida Minimum Wage Law - Essay Example

? Florida Minimum Wage Law, The High Cost of Minimum Wages Introduction Minimum wage is the least amount of money paid by employers to an employee as remuneration of their hourly, daily or monthly contribution. Equally, it is least pay where workers are willing to sell their labor. Although minimum wage laws have affected different jurisdictions, there have been different opinions concerning the benefits and disadvantages of minimum wage. Those that support the idea of minimum wage claims that it increases the standard of living of employees, reduces inequality, reduces poverty, makes businesses to be more efficient and increases the morale of the workers (E, Michael, Canada, & Policy, 2008). On the other hand, those who criticize the idea of minimum wage claim that it increases the level of unemployment (especially the low productive employees), increases the level of poverty and damages businesses. In 2004, an amendment was passed in Florida that provided for minimum wage that would be slightly more than the rate of the federal minimum wage. The objectives of this policy were to improve the standards of living for the workers, safeguard the workers from low wage competition and cut down the dependence on the taxpayer-funded public utilities. In contrast to the federal minimum wage, the Florida minimum wage is an “automatic pilot” which is reset annually in reference to changes in Consumer Price Index (CPI) (Fishback, 2008). Under the federal and the Florida law, most of the businesses are allowed to take credits that the workers expect, which in turn result in low minimum wage for the tipped employees. Whereas the consequences of minimum wage on both employees and businesses are significantly negative, it is even worse for the job seekers. It is evident that high input prices and high production causes the businesses to economize on those inputs and raise the minimum wage. The effect of minimum wage in Florida was realized few years ago. In response to this, a proposal was put in Congress so as to raise the minimum wage for the tipped employees. Aims of the minimum wage proponent If the level of the minimum wage could have been imposed regardless of unemployment level, then the standards of living would have been boosted among the ill-skilled at the expense of high profits. Nevertheless, the economic theory has found out that increase in employer cost should be passed down to the customers. Usually, this is ignored especially in statements which address the desirability issues of the minimum wage. The Florida’s minimum wage constitution captures all the tortured logics of minimum wage (Abbott, 2012). This minimum wage should be able to sustain a healthy and decent life for the workers like their families. Essentially, Florida, just like most of the countries in the world, agitates for better pay for hardworking employees. Likewise, most employers prefer working in a business environment free from worry of other competitors operating at low costs. Lastly, most of the tax payers welcome public policy initiatives that eliminate the desire for more expensive public services; while at the same time providing decent and healthy life. In fact, for most of the people, work is seen as a means to an end. The end in this case is a healthy and decent life while a means is good skills and hard work. When there is scarcity of resources, there should be a standard system of selection among the competing uses (E, Michael, Canada, & Policy, 2008). Arguments surrounding the economies of minimum wage The standard economic theory implies that the implementation of minimum wage bill might arouse a lot of curiosity. One of the things is the possibility of low employment opportunities when compared to the situations freed by the minimum wage. When the labour prices increases steadily due to periodic increase in the rates of minimum wage, there is a decrease in the quantity of labour demanded. High wage encourages the more expensive labour to be substituted by the automation processes or into cheap labor from employees. Therefore, if no adjustments are made, employees will have no option but to accept wages on their investments. This may encourage them to look for other means so as to deploy their capital. This can only happen if they are unable to adjust to the current high cost structure (Fishback, 2008). The implementation of minimum wages calls for a more expensive labour, which may in turn limit a lot of businesses from hiring. For instance, the fast-food industry is one of the industries that use the minimum wage labour. Consider this industry adopting the use of integrated chairs and tables which are fixed on a single pedestal. Whereas buying a complete set of fixed chairs and tables is a bit expensive, it would have reduced expenses by using light wooden chairs and standard tables and still serve the same purpose. This is just but an example of using the readily and cheap facilities to reduce labour costs (E, Michael, Canada, & Policy, 2008). On the other hand, changes in the minimum wage have no significant at the top of the ladder especially at the higher rank. In its place, the effects of unemployment are concerted in areas with limited skills and low wages. If the businesses are able to create job opportunities for the skilled and maintain constant profits, then the minimum wage will eliminate the lowermost rungs. This may deny the ill-skilled workers an opportunity to secure fundamental work skills and other promotion opportunities. Since the minimum wage calls for expensive ill-skilled labor, there will be a decrease in demand in quantity of low skilled labour. Furthermore, there are other effects of minimum wage on the supply of labour market; it will change the workers’ behavior especially those who plan to secure a job. Significantly, minimum wage workers will enjoy high standards of living if their wage is increased. However, the company will have to strain to meet the demands of its workers (Abbott, 2012). Nevertheless, increase in wages is not without any cost to the others especially in the pool of ill- skilled but potential employees competing for job opportunities. The income enjoyed by the hired people will result in a decrease in living standards of those who have lost employment opportunities. Since the minimum wage takes wages slightly above the free market equilibrium, it may encourage other people who might not have had the idea of entering the labour market to venture in. How minimum wage affects employment According to National Employment Law Project study, there are a lot of destructive effects of minimum wage employment. For instance, the use of store level payroll data for fast service stores in examining the effects of employment (E, Michael, Canada, & Policy, 2008). The results from the store managers show that minimum wage yields increase in the prices of commodities. In turn, this will reduce the profit margin, overtime, work schedules and wage compression. Although this effect is insignificant in some way, most businesses don’t want to take chances. In most companies, the effects of minimum wage have played no role in changing the face of the organization. However, most companies want to maximize profits and reduce the production cost. To achieve this, they should employ qualified workers and use of automation. Currently, most of these companies pay their workers minimum wage of $7.25 an hour (Abbott, 2012). Raising this to $7.93 per hour in 2014 may change the employment strategy. Essentially, the effects of dis-employment are mainly concentrated in the young energetic men. This is the target group in most companies. However, the companies should make use of cheap labour so as to maximize profits. Even though they aim at doing so, they should not compromise their operational standards (E, Michael, Canada, & Policy, 2008). There is enough evidence that shows constraint in other constraints. When labour market reforms were enacted, there were additions in wage flexibility to the lowest end of the job market. This resulted in imposing of market-based wage restraint in place of the government acceptable minimum wage. It was found that minimum wage resulted in production of substandard products which fell substantially after the reforms in the labour market. Increasing the minimum wage to $7.93 would reflect a good step. Yes, a lot of job opportunities will be developed, but it will cost a lot the companies (Abbott, 2012). Although it is beneficial to the employees, the business will be subjected to a hard task to sustain its employees. Economic effects of minimum wage In one of the hospitality industry in Florida, it was reported that the total costs of wages and salaries was approximately 35% of the total sales in 2011. It is roughly a third of the revenue was used to pay salaries and wages. During this financial year, the industry paid its workers a minimum wage of $ 7.82. In the previous years, the same industry paid its workers a minimum wage of $7.35. This added some workload to the industry to meet the increased minimum wage. Factually, it implies the industry has to go an extra hand to meet these changes. According to the data collected from the Quarterly Census of Employment and Wages (QCEW), it is anticipated that businesses might operate in low profit margins if the policy of minimum wage is implemented and they maintain their operation levels. This might reflect on a direct decrease in the employment rate, and more so, severe in states with full implementation of the federal minimum wage. Generally, imposing minimum wage bill would result in decreased employment of full-time employees. This is the consequence likely to be faced in 2014 if the minimum wage is raised. For Florida State, the McPherson and Even disemployment effect will be muted because of the presence of tipped workers’ wage which is already higher than the present federal minimum wage (Abbott, 2012). More effectively, most of the work destruction has been experienced in Florida because of tipped wages which is currently twice more than the federal tipped wage. Nevertheless, even with the present escalated tipped wages that tries to soften the effect on Florida, the ultimate effect would result in loss of job opportunities for some workers. In the mean time, the competitive disadvantage which the Florida’s higher minimum wage has already imposed on some businesses is majorly compounded to few industries where the market share under the multi-state operators is considerable (Abbott, 2012). When choosing new sites for extensive labour business, it is worth considering the cost of labour before making any implementation. Conclusion There are significant effects of raising the minimum wage. Although it is very significant in workers, the company might not enjoy the benefit. Maintaining a constant operation in business without losses may not be realistic. At times, the business may operate low, unable to meet the workers’ demands. This may prompt the company to think otherwise. In the same manner, government should be considerate in implementing laws so as to accommodate the businesses and customers. For harmonious operations between workers and business enterprises, a standardized minimum wage should be established (Abbott, 2012). References Abbott, L. F. (2012). Statutory Minimum Wage Controls: A Critical Review of Their Effects on Labour Markets, Employment & Incomes. NY: Industrial Systems Research. E, G. W., Michael, M., Canada, E. C., & Policy, I. f. (2008). Minimum wages: the new issues in theory, evidence, policy, and politics. the University of Michigan: Economic Council of Canada. Fishback, P. V. (2008). Government and the American Economy: A New History. Chicago: University of Chicago Press. Read More