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Insights and advice for job seekers and employers from the experts at STS Staffing. 

How a Higher Minimum Wage Impacts Hiring

Two business owners sitting at a table calculating the expenses of hiring a new employee
Minimum wage is one of the most polarizing subjects in America. Regional, political and socioeconomic differences have fueled this divisive topic for decades. United States presidents have been on both sides of the argument and chances are, you have taken a strong position either way.

States are now taking the responsibility of establishing newer and higher minimum wage legislation. It’s likely these laws will be proposed time and time again no matter the election year.

But what does that mean for your business? Specifically, how would a higher minimum wage impact your hiring habits?

What Will Change When Minimum Wage Rises

Minimum wage has changed 28 times since it was first federally enacted in 1938. July 2019 will mark the 10-year anniversary of the last time it’s been raised. America is overdue for another federal increase.

Business leaders need to be ready for change. Let’s lay out the obstacles you will encounter when minimum wage rises and hiring flexibility becomes restricted.

Loss of Flexibility

Paying your workers a higher wage is going to increase your budget’s floor. This means it’s going to be difficult to create room to hire more people to fill a skill gap when budgeting for a higher minimum wage.

You need to be hyper-focused on the skills you are hiring for in your workforce. How many different tasks can a certain employee perform and how can I best utilize the skills they already possess? These are the questions you need to hone in on before sending a job post into the ether.

Recruiting services like STS Staffing can help establish these skills you’re looking for. We can also vet candidates to your standards so you can maximize the potential output of a new employee.

More Applicants to Choose From

It’s has been prophesized that the push for $15 minimum wage will not only raise prices in industries like restaurants, but employment rates will take a hit, too.

California raised its statewide minimum wage in 2017 to $10.50 and it reduced employment by 10 percent.

With more people looking for jobs, your pool of candidates is going to grow. While we tend to believe an increase in applicants is a good thing, it could ultimately make the hiring process inefficient. If minimum wage is raised, you’ll need to button down your hiring process so your job posts aren’t flooded with applications that are a waste of your time.

Different Approach to Hiring Strategy

The percentage of 16- to-19-year olds who are employed has fallen from 46% in 2000 to 30% as of last summer.

Economists David Neumark and Cortnie Shupe believe there are 3 factors behind this worrying trend:

  • Rising minimum wage
  • Increased returns on education so teenagers focus on school
  • Labor market expansion from immigrants

They found the rising minimum wage has the greatest effect.

This is important to consider for your hiring strategy. There are going to be more unskilled and inexperienced workers in your candidate pool that will work for minimum wage. Hiring someone with no experience is a risk, and an expensive risk to make if minimum wage goes up.

The onus will be on you and your leadership team to assess your hiring strategy and to determine if hiring an inexperienced worker is a risk your company is willing to make.

Starting Wage Ripple Effect

When the basement wage at your company rises, so will the rest of your wage ranges. A minimum wage worker who experiences a $3 wage hike could suddenly find themselves making as much as a tenured manager who has more experience. Now, you will have to pay your mid-level employees more, and so on. Suddenly, your budget needs to be reimagined so you stay in business.

When budgeting for a higher minimum wage, there are creative ways to work around this issue. It will be just another obstacle for your company to consider if and when minimum wage is increased.

The Higher the Minimum Wage, the Harder It Is to Hire

This is where STS Staffing comes in. When considering what will change when minimum wage rises, you need to identify the people who will be worth the money and have the skills you need to keep your business running smoothly.

We use our online skill testing service to conform to your hiring needs so you can choose the right person for the job. Regardless of if and when minimum wages rise, contact us for a quote and let us help you hire the best people for your long-term, or short-term, needs.



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