Minimum Wage

by Albert L Kelley, Esq.

Recently there have been numerous articles in the press regarding the minimum wage. There are questions of whether it should be raised, the effect it would have on business, and why it is even necessary. The prevailing view is that the minimum wage is mainly earned by teenagers looking for extra spending cash or seeking their first job.

The federal minimum wage is $7.25 per hour; and in Florida, the minimum wage is $8.05 per hour (while there is a lower minimum wage for tipped employees, with the tips they must reach the regular minimum wage or the employer must make up the difference). If a worker in Key West being paid minimum wage is lucky enough to have a full-time job at 40 hours a week, their weekly pay is $322. On an annual level that equates to $16,744 or just over half of the average income in Key West for 2013 (By the way, the federal poverty level is just $11,770). However, that’s not take home pay. Taxes account for 7 ½% or $1255 and Social Security accounts for 7.65% or $1281. This leaves the total take-home pay of $14,208 per year. And if the worker only gets 35 hours a week, the take-home pay drops to just $12,431 per year. But now we have to look at the cost of living. In Key West, the monthly median rent is roughly $1409. Annualized, that equals $16,908; or $2700 more than a minimum-wage worker will earn with a full time job. Granted, there are cheaper houses. From April 1 through April 13, 2016, the average price of a room in Key West (not an apartment) advertised on craigslist was $1084, or $13,008 per year. This would leave our minimum-wage worker with only $100 left over each month to cover all other expenses including food, toiletries, transportation, entertainment, clothing and utilities. These costs increase if the worker has children.

If the minimum wage was reserved for high school students working their first job none of the above might seem important. Unfortunately, most minimum-wage workers are not teenagers. In fact, only 30% of all workers making minimum wage are under 20 years of age. Half of the minimum-wage workers are between 20 and 44 years of age and 17% are between 45 and 64 years. In fact, if we look at fast food workers, the median age is 28, 25% have children and more than half are women. But minimum-wage work is not limited to fast food restaurants. 10% of all housekeepers and maids earn minimum-wage or less and one out of every four home health aides earn minimum wage or less. Nail salon workers, certified nurse assistants, workers at stores such as Walmart and Home Depot, and many airport workers including cabin cleaners and baggage handlers often are paid minimum wage or less (This month Target raised its minimum wage to $10 an hour). In 2012, 1.6 million workers in the United States were at the minimum-wage and 2 million workers were under the minimum-wage.

What is the impact on business if we raise the minimum wage? This is a hard question to answer. While labor is generally the largest cost of most businesses, the impact an increase in minimum wage would have is a hotly contested issue. While some argue that increasing labor costs will also increase cost of goods, most studies that have been done show the increase to be minor. Others argue that increasing the minimum wage will give workers more money which they can funnel back into the economy. This argument also doesn’t seem to hold much weight as we are not increasing the amount of money in circulation, just who has it. While the past studies seem conflicting, many people are now looking at places like California where the minimum-wage is much higher ($10 per hour) with no apparent impact on business.

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is also the author of “Basics of Business Law” and “Basics of Florida’s Small Claims Court” (Absolutely Amazing e-Books). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.

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