Firms seeing consequences of minimum wage increase
I have been a practicing management consultant for over 40 years, 20 of those with an international CPA and consulting firm.
Recently I was engaged by a long-standing rural Western New York manufacturer (almost 100 years) with 250 employees – the majority of whom earn less than $15 per hour and many of whom have been with the company for over 20 years. My engagement involves developing a strategy to deal with the new minimum wage legislation to see if there is any way this manufacturer can remain open under the new requirements.
After some study it is apparent that there are several options:
Close the business while it is still solvent, sell the property and retire. This of course would result in the layoff of 250 people.
Find a way to compensate for the additional wage and fringe costs by cutting other employee programs such as health insurance, life insurance, pension contributions, vacations, holidays, etc.
Reduce the number of employees by approximately 20 percent and try to perform the work required with a smaller workforce along with cuts in fringe benefit programs.
Look for ways to automate some activities (this will require capital investment).
It is a crime that New York’s legislators and the governor pass laws for political gain without considering the consequences. The above situation is only one company perhaps among thousands in New York that are facing the same issue. The consequences of this legislation will be to put many more low-wage earners on the unemployment rolls, therefore actually harming the people that this legislation was supposed to help. Wake up, New York.
Michael D. Deakin, CPA