HUFFINGTONPOST: …Although my son went to culinary school and trained as a pastry chef, he has been unable to find work paying more than nine or ten dollars an hour, and not full time either. Typically, when volume slows, his bosses send him home; he’s lucky to get 30 hours a week. Those bosses–small business owners of restaurant franchises–also struggle to survive. Hurricane Sandy flooded out my son’s last employer.
Conservatives claim that a minimum wage increase will cause job loss. Jared Bernstein disagrees. He cites studies showing that a modest increase in the minimum wage, one that only affects a few percent of workers, won’t increase unemployment rates. Minimum wages, he says, also set a standard when there’s a range of possible wages. I agree with Bernstein. However, speaking from my son’s experience, there may be a reason why most studies show little effect: employers often cheat by paying employees for fewer hours than they actually work. The nominal wage may go up, but the effective wage remains the same.
Payroll taxes aren’t so benign. That’s especially true for small businesses like my son’s employers, where staff payroll is the biggest cost. The minimum wage, nominally at least, only affects the division of revenue between employer and employee. Payroll taxes take a big bite out of the total revenue before it’s divided. In 2013, Social Security takes 12.4% for wages up to a $113,700 cap. There’s another 2.9% for Medicare, with no cap. Then there are tax nibbles for Federal and local unemployment and disability. The Affordable Care Act will add further costs. Regardless of the exact share as between boss and worker, payroll taxes encourage workers to drop out, and employers to hire fewer workers and squeeze them harder, or to automate, or simply to fail… (more)
