All of the arguments about minimum wage (pro and con) aside, Obamacare has done many things to make an increase in wages a moot point for most of the working poor. (After all, it doesn’t matter if the minimum wage is a million dollars per hour if you can’t get a job and as we all know jobs are at a premium in the Obama economy.) We have already seen the reduction in new hires and transition of full time employees to part time employees by companies looking to be ready for the so-called corporate mandate part of Obamacare. (Complete with the spin of hundreds of thousands of jobs created … you know… all of the new part time positions needed to cover the hours once worked by full time employees who had their positions reduced to part time.) Well, as it turns out there is more harm to job prospects for the working poor on the horizon due to the employer mandate and that is the employer’s cost per employee.
Just like with price increases in energy, transportation, ingredients/parts, and loss (waste, mistakes, and thief), increased payroll costs force businesses of all sizes to reevaluate their policies, procedures and systems in order achieve the highest efficiency levels possible. When the expense of payroll becomes too high companies must find ways to do more with fewer people or they will put themselves out of business when they can no longer balance what they can bring in (how much people are willing to pay for their service or goods) with what they must dole out (what it costs them to do business i.e. power, insurance, and yes payroll, just to name a few). Every company should want to maximize it’s efficiency because that’s where company improvements, wage increases, and profits come from, but no company wants to increase it’s employees work load due to a need to reduce personal; because unhappy employees have a hard time taking pride in their work and employees who do not take pride in their work always cost companies more than they will ever earn for the company.
How is the employer mandate a problem for low-wage earners finding jobs or keeping the jobs they have now? Well let’s start by looking at the numbers. Obamacare requires employers with 50 or more employees to offer qualifying health coverage (an Obamacare approved plan) to their full-time workers. This health coverage is expensive and that is why so many companies had already made public their plans to either keep their workforce under 50 or to move as many of their employees to a part time status as possible and still meet their customer’s needs . In 2015, when the mandate will take effect, it will add $2.24 per hour to the cost of employing a worker with single coverage (more for family plans). Companies that do not provide coverage will be fined $2,000 per employee per year (after the first 30 workers) that comes out of after-tax dollars. That is a $3,279 increase in pre-tax payroll costs—$1.64 per hour. When you combine federal or state minimum wage rates, payroll taxes, unemployment insurance taxes, and then Obamacare’s employer mandate, employing a worker full-time will cost the employer a minimum of $10.30 an hour. The government has made the hiring of unskilled workers more costly without raising workers’ pay a single cent. (And, just FYI, if the federal minimum wage was to be raised to $10.10 an hour that $10.30 per hour cost to employers becomes $12.71 per hour.)
Now put yourself in the roll of the hiring manager or small business owner. If each and every employee you hire is going to cost you more than $10 per hour then you are quickly faced with the reality that you need to be far more selective about who you are willing to add to your workforce. Any new hire must be more flexible to the company’s needs and already have at least a good set of both hard and soft skills. This makes entry-level jobs harder to get as normally you get hired for the soft skills and are trained for the hard skills in most entry-level employment. The majority of people use the entry-level jobs as a stepping stone to training which leads to higher pay.
This mandate will force companies to raise the minimum standards for their entry-level employees. Adding an increase to the federal minimum wage will only force these companies to raise those standards even higher. Many companies will be forced to let go of current employees that are lacking in their skill set and these newly unemployed will be at a disadvantage in seeking other employment because all of the other companies have also raised their minimum requirements for new hires. Here I will remind you that raising minimum wage will do no good for anyone who can not get or keep a job so that they may EARN that wage.
The point is that Obamacare is even more of a job killer than most conservatives thought it would be and sadly it will hurt the low-wage earners the most. But to the issue of raising the federal minimum wage; Obamacare has, from the employer’s standpoint, already raised it past $10 per hour. The employee will never see the extra cash but your employer is paying it just the same. Beyond that, two thirds of minimum wage workers receive a raise within a year making them no longer minimum wage workers. But more to the point, minimum wage jobs are meant to be entry-level jobs, they are meant to be a stepping stone. At no time has any employer intended for their employees to make a career out of a minimum wage job. And despite the efforts by some this past year to convince quick service restaurant workers that they should be paid $15 per hour for their entry-level positions; if there really is anyone out there that expected to be able to raise a family on a minimum wage, then the problem is with that person not the company that hired them.