Raising the minimum wage will simply increase costs for employer and employee

For some reason it seems difficult to get across the concept that when there is only so much of the pie to cut into wages, pension, health benefits, annuity benefits, sick leave, holiday pay, etc., that by dictating how much the employer will pay in one area, automatically means an decrease in other areas.

We understand the problem of some individuals feeling that they are not making enough money and, in a lot of cases some employers also feel they do not make enough money. The problem is exacerbated since the employees see their net pay, after all the taxes have been deducted.

What the employer sees, however, is the gross cost, which includes mandated workers’ compensation premiums, temporary disability insurance premiums and unemployment insurance taxes, all of which are based on how much the employee makes. So a minimum-wage hike ups all of those costs as well.

As an example, on a $1 paycheck, the employer sees $1.45 (estimated) in costs; the employee perhaps only gets a $0.67 (estimated) paycheck. Any increase in wages automatically calls for a corresponding increase in fringe benefits costs; however, because of the tax rates, the employee only sees a very small increase in their net paycheck.

We also find it very difficult to compare our employees’ pay rates with employees from other states. Employers in other states don’t yet have all the costs of a health care act to deal with, like the Hawaii Prepaid Health Care Act, a cost that can add another $300 to $1,200 cost factor to each employee, per month.

Most also do not have temporary disability insurance costs for off-the-job injuries to deal with, as Hawaii is one of a few states that extends that employee benefit to all employees. Factor in those costs alone and our full-time employees are getting around another $2, plus per hour on top of the minimum wage.

There is no doubt that those supporting a minimum wage hike will feel like they should make more money, and we do not disagree with that. However, given today’s realities for most businesses, especially small ones, there is no extra money for companies to pay more wages and what this will do is cause the elimination of individual positions so that remaining existing employees can be paid a higher rate.

If one can only afford to pay "X" amount of dollars, however, they are eaten up through wages or through fringe benefits; then it automatically means action one of two ways:

» The price of the goods offered goes up, causing the rest of the consumers who purchase goods and services from the business to pay more; or

» The employer cuts back on the number of people to which he has to pay mandates.

Either way, we believe the people of this state lose.

Those with a singular focus on the amount an employee takes home, and accompanying complaints that it is insufficient, typically fail to realize that stores where they currently buy goods and services food, clothes, medicine and who are forced to raise their wages (costs) will have to also raise the price of those goods and services. So what have we accomplished?

I talked to an employer recently who provides job internships to students and pays them the required minimum wage. He says they are a financial loss now but he does it for community good will and it teaches the interns "job basics." An increase in this financial loss could curtail or minimize the program.

And, what about those humanitarian employers who provide jobs to people with disabilities and who don’t perform at full productivity? Are they going to lose current jobs or future job availability because their cost exceeds their financial productivity?

We also find it quizzical that part of the reason, we are told, to increase the minimum wage is that the wage earners will immediately infuse their dollars into the economy. That may be true, but even the state Department of Labor noted that only 2.2 percent of the workforce in 2012 was earning minimum wage or less. An infusion of that nature won’t even make the meter move.

Lastly, we disagree with any proposal that uses the Consumer Price Index and allows some automatic, mathematical formula to dictate the wage amounts. Wages should have some relationship to abilities and effort.

Again, an automatic increase in wages may mean an automatic decrease in other benefits, something that should be considered on an individual employee basis.