Aspiration & Struggle

How Would a Minimum Wage Increase Affect Millennials?

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The debate over a minimum wage increase is an old one that seems to come up every few years around election time. Increasing the minimum wage seems like a great idea to voters who work jobs that pay by the hour, but for employers, an increase would mean higher costs and lower profitability. Speaking as a Millennial, here are a few points that candidates and voters may want to consider before pressing for a higher minimum wage.

When Hourly Beats Salary

In general, a salaried position seems to offer more benefits than an hourly position. However, in some cases, working an hourly job is better than a salaried job. This is particularly true with overtime. Under the Fair Labor Standards Act, nonexempt employees are paid by the hour and are entitled to overtime pay, whereas exempt employees, who are typically salaried, are not eligible for overtime pay.

The Bureau of Labor Statistics reports that 58.7 percent of workers—a majority of the U.S. workforce—are paid as hourly employees. Meanwhile, Millennials are entering the job market and are looking for positions where they can grow their skills. Many hourly positions offer training while paying the minimum wage to keep costs low. Raising that wage could result in fewer jobs because businesses will be forced to cut positions to compensate for lost profits.

Training at Minimum Wage

Millennials surpassed Generation X as the largest group in the labor force in the first quarter of 2015, but many of them are unskilled and are seeking jobs where they can build the foundation of a successful career. Hourly positions are often a good fit, and a minimum wage increase would change that dynamic. Someone just entering the workforce can still complete a task, but they will likely take more time with it than a trained employee would. If a company chooses to train an unskilled worker, that company can save on labor costs by paying the minimum wage while that employee trains. However, if the minimum wage goes up, companies might instead look for skilled workers who don’t require training and can complete their work in fewer hours to justify the higher wages.

Employer Backlash

According to payroll processor Paychex, labor is often the single largest line item on a budget sheet. Companies are sensitive to their labor costs, including overtime. Hiring a new, unskilled hourly worker can cost businesses more. Companies are slowly adding jobs across the country, but they’re still watching costs and interest rates. And despite more jobs being added each month, more workers are entering the job market, keeping competition high.

All things considered, a higher minimum wage could leave unskilled Millennials out in the cold—and with a wage of $0.