In December, the federal government will implement overtime wage regulations that greatly expand the number of people eligible for overtime if they work more than 40 hours.
In November, voters in Colorado will have the chance to approve a minimum wage increase that gradually raises the level to $12 an hour by 2020.
Add it all up, and it equals a major expense for businesses of all sizes.
Taken individually, businesses might be able to absorb the additional employee costs.
A small business might be able to withstand the overtime regulation rule by carefully monitoring workers’ productivity and their hours.
A minimum wage increase might be passed on to customers through higher costs, particularly in the retail and restaurant sectors.
But both wage increases together might be too much for some, perhaps many, businesses.
The overtime wage rules are part of federal law now — and without congressional intervention, businesses will have to comply. That means tracking hours and paying overtime for anyone who makes less than $47,476 annually. The regulation is complicated, and includes several exemptions — employers are just now trying to figure out if they are paying workers correctly.
The proposed minimum wage rule is more troubling, because businesses won’t be able to manage wages just by cutting hours. They’ll have to consider new hires and new expansions very carefully if the rule passes in November. The wage will go up 90 cents each year until it reaches $12, and will be adjusted for inflation every year thereafter.
It seems restaurants and retail stores will be hit the hardest. While at first glance it seems positive for wait staff and kitchen workers, it could end up harming them. Restaurant owners will have to choose between hiring more workers to cover shifts or increasing prices.
The unintentional consequences could well outweigh any initial benefits.
Wages in the United States have been stagnant since before the recession — and Colorado Springs is no exception. Young professionals frequently complain that wages in the city are so low that they quickly look elsewhere once they have experience under their belts.
And it’s clear that these regulations are supposed to improve the lot of employees — particularly those in low-wage jobs. With ever-rising housing costs, it’s difficult for families to make ends meet.
But taken together, the increase in minimum wage and the increase in overtime pay could be difficult for small companies operating on the thinnest of profit margins to incorporate into their overall business plan. The increases in salaries might lead to increases in prices, erasing any benefit low-wage workers receive.
While something should be done to correct increasing cost of living combined with stagnant wages, the needs of businesses should be considered as well. As well-meaning as they are, the two regulations could devastate small businesses.
Once companies have adjusted to new federal requirements, then it might be time to increase the minimum wage. and allow businesses time to figure out how to comply.
Then, in 2018 during midterm elections, perhaps try to increase the minimum wage.
Business owners take on most of the risk of doing business. Governments should not make it harder for them.