A sign that could have appeared in any town has caused quite a stir. The message is direct: "Stimulate your ass to work—Every business in town is hiring." For business leaders, it aptly voices their frustration when trying to compete with the younger generation's attitudes. It also ignites debate on local and federal labor policies—does the government create disincentives to work? Or, are businesses not responding to the needs of the unemployed, not offering a living wage, and therefore deserve to fail?
This sign is the latest instance of what I call “The Great Employee Wage Debate,” which judges the cost of labor for any business versus society's expectations of perceived living wages.
Labor Costs
The more significant the burden on a business for all labor costs (including all paid benefits and the labor law compliance regulations), the more expensive it is for a company to hire an employee and pay higher wages. Regardless of their good intentions, artificially driving up labor costs and labor law burdens from local and government policies will accelerate the drive to eliminate labor within every business.
Private industry worker compensation costs for employers averaged $36.64 per hour worked in June 2021. Wage and salary costs averaged $25.89 and accounted for 70.6% of employer costs, while benefit costs averaged $10.76 and accounted for 29.4%, according to the Bureau of Labor Statistics. The Small Business Administration (SBA) reports there is a rule of thumb that the cost of benefits is typically 1.25 to 1.4 times the salary, depending on certain variables.
When lawmakers push for additional labor policies upon the private sector for labor wage improvements and benefits (increased cost burdens), there is something else to think about: just 42% of working Americans support the other 58%. The result of long-standing trends is that the percentage of private-sector employees is the lowest since 1983. The private sector is responsible for paying for the public sector.
All businesses will continually seek to lower labor costs by reducing the employee hours, minimizing the number of employees, eliminating positions by using automation, and continuously refining current practices.
