24 July 2009

Minimum Wage Increases to $7.25 / Hour

The government passed legislation on July 24, 2009 that increases the minimum wage to $7.25 per hour. The wage increases will impact businesses and employees in thirty states. Although this may sound great on the surface, it is terrible for many small business owners and their employees.

People generally think that wage increases are beneficial because employees will have more money to save or spend. However, the last thing struggling business need are higher labor costs since it is already very difficult for a small to medium size business to generate a profit in this economic environment. An increase in wages will force many companies to reduce overtime, cut bonuses and layoff staff. While some businesses may cut back sharply, many others will simply go out of business.

In the short-term, an increase in the minimum wage will help millions of people who remain employed. However, with less overtime, fewer bonuses and more layoffs due to higher labor costs; there will be less money floating around to buy the products and services required to keep the remaining people working.

Faced with little or no alternative, many businesses have resorted to hiring offshore virtual assistants for many tasks that were or could have been done domestically.

Several states have even higher minimum wages than what is required by federal law.