Don't forget to update your posters find out the latest wage increase in 2022!
The day we have been anticipating, or dreading, for 11 months has finally arrived. The Florida minimum wage increases by 15.6% to $10.00 per hour effective 9/30/21. This means an increase of $2808 for full-time minimum wage workers. Sounds great. However, what some have touted as a huge achievement will arrive with less fanfare than Britney Spears being freed from her conservatorship. Why? Well, to quote Bill Clinton’s strategist, James Carville, “it’s the economy, stupid.”
In November 2020, Florida voters passed Amendment 2, changing the state constitution by adding a minimum wage provision that will require increases to $15.00 per hour by September 30, 2026. For those of you counting, that is a 73% increase in labor costs over the next five years for businesses paying employees at minimum wage! FYI, Florida is the only state to change its constitution to raise the minimum wage.
So why is the impact less than expected in the first year? Over the past 8-10 months recruiting has been a challenge for nearly all employers in all sectors across the state. Starting wages have increased, benefits have changed and employers have had to become more creative in their ability to recruit and retain employees. That’s how it’s supposed to happen. The natural cycle of business has increased starting wages. That being said, experts say that over the next 18-24 months, the employment situation will normalize and the rapid increase in wages will subside. Whether it decreases or maintains at current levels is yet to be seen.
When you look at the impact of the minimum wage increase over a five-year period, a 73% increase in labor, plus increases in workers’ compensation and benefit costs tied to wages, will provide a greater challenge to many businesses across the state. The impact will be felt less in larger metro areas but employers in smaller and more rural towns will need to figure out how to manage these increases while still surviving.
Here are a few options employers are implementing to absorb these yearly increases.
Reduce the staffing levels to reduce total labor costs. We have seen this already in supermarkets, big box stores and even gas stations. How many times have you used self-checkout or ordered a burger via a kiosk? Expect more of it.
Reduce the number of full-time employees in favor of more part-time employees. This is one way employers can manage overtime. If employees are only scheduled for 30 hours a week, it will be hard to get to the $15.00 per hour overtime rate that hits after 40 hours.
Raise prices to cover increased costs. Inflation is already increasing more rapidly than anytime in the past 10+ years. Part of this increase is due to increased labor costs prior to minimum wage increases. Expect this trend to continue in Florida over the next five years.
Remove options for customers. Businesses can save money in other areas by reducing the cost of overhead, supplies and inventory. Have you noticed restaurant menus shrinking or retailers providing few options for products? By requiring less inventory and fewer items for the menu, businesses can save money. How far can you go before customers’ dissatisfaction becomes a tipping point?
Unless another constitutional amendment is passed (not likely to happen), Florida’s minimum wage will continue to increase every September 30th by another $1 per hour until 2026. Regardless of the impact on the economy and small businesses, employers need to prepare for these increases. Full-time employees who earn minimum wage will receive a $2080 increase each year, but employers and their customers need to be prepared for increased costs as well. Last, but a very important point for employers, there is a new Florida Minimum Wage poster that must be displayed starting today. You don’t have to order a new set of posters, but rather, print out this one and place it over the old poster.
Look for tomorrow’s blog on another new requirement for Florida businesses using independent contractors!
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