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Companies may raise prices to offset minimum wage increases

Employers facing mandated minimum wage hikes are considering raising the prices of goods and services they sell.

Thirty percent of those polled say they are doing that, while 36 percent say they are going to cut down on OT work, 19 percent say they will resort to more part-time employees and 12 percent say they will reduce their headcounts.

All of this is according to an Aon Hewitt survey of 135 firms that also found 72 percent of them have not charted a course for paying their lowest-paid workers more amid the increasingly vocal national movement to raise the minimum wage.

The report found that 59 percent of organizations with minimum wage employees do not plan to raise the wage unless mandated by law.

“The majority of employers are taking a wait-and-see approach (on raising wages), and do not plan to make any changes until new regulations are issued and they assess the actions of their competitors,” said Ken Abosch, a compensation practice leader at Aon Hewitt. “Organizations are very sensitive about increasing one of their largest fixed costs and overall expense categories, and many of them simply don’t see any advantage to increasing their labor costs at this time.”

The movement to increase the minimum wage has scored some big successes. One of the most prominent examples came in Seattle, which is in the process of phasing in a minimum wage increase that will reach $15 an hour for large employers in 2017. And most recently, New York Gov. Mario Cuomo announced he would unilaterally establish a $15 minimum wage for all state workers, making New York the first state to set such a high wage for its public employees.

Economists disagree whether requiring higher wages helps those at the bottom of the pay-scale or simply leads to job losses and higher prices for consumers.  But Abosch’s interpretation of the survey is that the wage hikes will not produce their intended benefit to low-wage workers.

Employees and consumers will likely feel the greatest impact,” he said. “Nearly half of the actions organizations are actively considering to offset increased costs may actually undermine the value that an increased minimum wage was supposed to deliver to low-income workers.”

About the Author

Lon Matejczyk

Lon is the former publisher of the Colorado Springs Business Journal and Colorado Springs Military Newspaper Group.He has served in leadership roles at various newspapers in Iowa, Florida and Wisconsin. Lon received his Bachelor of Arts in Communications from the University of Wisconsin, Eau Claire and attended the Kellogg Graduate School of Management at Northwestern University. Earlier in his career, Lon spent several years as a sea captain and held a 100-ton Coast Guard license. Lon is a former rugby player, referee and administrator and now coaches under 13 year old kids. Lon has served on the boards of numerous community and business organizations including Colorado Springs Leadership Institute, Peak Venture Group, CS Quality of Life Indicators Business Index Committee, Junior Achievement and is a member of The Colorado Thirty Group.  Lon was given the “Making the Pikes Peak region a better place to live work and play” award by the CS Chamber of Commerce, was the VFW Post 1’s business citizen of the year.

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