August 2007

By Joe Pisciotto
Staff Writer

On Friday, May 25, buried deep within legislation to provide supplemental funding for the war in Iraq, President Bush signed into law something that will change business in America: the first federal minimum wage increase in nearly 10 years.

The wage is set to increase in three steps over the next two years, eventually settling in at $7.25 per hour. While many states already have minimum wage laws above the federal minimum, not many go as high as $7.25.

Also included in the bill were tax breaks for businesses to offset their soon-to-be larger payrolls.

Various groups have issued reports on how they think this increase will affect business in the United States. Some say it will be a boon to low-income workers and the economy in general; others think it will damage small businesses and discourage investment.

According to the Environmental Policy Institute, an economic think tank that focuses on low- and middle-income workers, when the wage hike is complete, nearly 13 million workers will see a pay increase. This number accounts for workers who currently make less than to “slightly more than” $7.25 per hour.

Some people believe that the wage increase will force companies to lay workers off and/or raise prices. The National Restaurant Association claims that the last minimum wage increase caused their member businesses to let go of nearly 150,000 workers and to effectively freeze hiring. Some analysts have said that the wage increase will cost low-skill workers and teenagers job opportunities.

On the other hand, some believe that the lowest-paid workers in this country were suffering from dangerously low buying power, as, adjusted for inflation, the pre-hike minimum wage was at its lowest in 50 years. According to this theory, a minimum wage increase, then, would provide security for low-wage workers and spur economic activity.

It’s tough for anyone to predict how the business world in general will respond to the federal minimum wage increase. But each individual company will have to make some kind of adjustment based on its location, makeup, financial situation, and other factors.

The increase is further complicated by many states having their own minimum wage laws that overlap in different ways with the federal minimum wage increases. However, no matter your company’s situation, you can do the following things to help your company stay on course.

Keep posters current

This might seem like an insignificant or easy step to take, but keeping wage posters current and visible for employees to read might be harder than it has ever been. For some, the state minimum wage will go up at different times and different intervals than the federal minimum wage, making it hard for already busy managers to keep information current.

Posters may have to be changed a couple times a year for the next few years, and companies that don’t keep their employees well-informed in this regard face potential fines. 

If you are confident that you will stay apprised of the dates of changes, you can download federal minimum wage posters directly from the Department of Labor website and then post them in a common area.

However, if you feel less confident that you’ll keep up, there are businesses that, for a fee, will manage your unique situation, keep you informed of changes, and actually provide you with official posters.

Take advantage of tax breaks

There are several tax breaks in the federal minimum wage bill. One provision allows a company to deduct up to $125,000 per year for new investments.

The bill also extends and increases the Work Opportunity Tax Credit for businesses making new hires. According to the Internal Revenue Service website, “The Work Opportunity Credit provides an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs.”

For each eligible individual they hire, companies can claim up to 40% of his or her “qualified first-year wages.” The credit has been extended to Aug. 31, 2011.

One part of the credit has been changed to include the hiring of people from “disadvantaged” neighborhoods who are between 18 and 39 years old. The previous incarnation of this break limited the credit to “high-risk youth” between the ages of 18 and 24.

The bill provides additional tax breaks for companies operating in Hurricane Katrina recovery zones. It also makes it easier for married couples in business together to file their taxes. 

Hire good people and keep them

Hiring good people is always important, but it is especially important when expenditures are potentially on the rise: a long-term employee will save you money versus having to invest the extra resources to hire someone new.

Hiring and keeping good people means you must do two things: conduct solid interviews and build an empowered workforce that takes advantage of employees’ strengths and interests.

A successful interview, from the beginning, rests on a manager who sets a relaxed tone. Good interviewers want to get their job candidates to open up and be themselves. It is the best way to assess how an applicant will fit in with the existing team.

Good interviewers also want to listen carefully and ask questions to clarify an applicant’s statements. This approach may seem obvious, but sometimes there are small inaccuracies between what applicants say and what they put on their resume/application. When managers notice and address these red flags, they help strengthen the interviewing process for the company.

Interviewers must always clearly state job details and expectations to applicants. This information lets them know exactly what is expected of them if they get the job, and their subsequent reaction helps managers gauge whether applicants will be upstanding team members.

Hiring is one thing, but keeping good employees around is another. Successful company leaders eschew traditional bureaucracy and instead work to build empowered workforces, where employees share resources, competencies, support, and vision. The result is often a fulfilling work experience. And it’s no secret that satisfied employees stay around.

While empowered workforces have many other benefits, empowerment helps keep employees invested in a company by directly involving them in company decisions and goal setting. Empowered employees also take responsibility for organizing their own time. Real-world empowered workforces are more efficient and productive than their bureaucratic counterparts, thus saving their companies money, time, and resources.

Companies are always increasing wages to reward and compensate their people. Accordingly, with increased pay come expectations of higher performance.

A minimum wage hike is no different: whether the higher wage motivates employees to work harder or it causes company leaders to examine methods and make organizational adjustments to encourage greater efficiency, good companies will be prepared to handle the change like any other.