Archive for Saturday, March 22, 2003

Wage impact

March 22, 2003


To the editor:

Supporters of a "living wage" proposal seem to miss the basic economic understanding of what impact such a policy would have on businesses in Lawrence.

All Lawrence employers currently pay at least an additional 10 percent in taxes on the hourly wage they pay their employees to cover Social Security, Medicare, and Unemployment compensation. This means that a $10 an hour job costs the employer $11 an hour. Each reliable employer carries worker's compensation insurance and liability insurance, premiums for which are directly related to the total gross wages paid each year. Most small businesses saw increases in rates for these insurances of between 15 percent and 30 percent this year. Artificial wage competition will actually cost the employer much more than the $2 an hour raise from $8 to $10 an hour.

By artificially mandating a wage level, the city would increase competition for qualified personnel to fill employers' needs. Local companies, the city, and the county would either have to raise their wages to meet this wage to keep qualified employees, make do with less qualified personnel, or hire fewer personnel. How would some businesses compensate? Some would raise their prices to cover the additional costs. Others would cut benefits and fringe items to make ends meet. Still others would be unable to recoup the expense and leave the marketplace. As local businesses raise their prices, so will other suppliers, vendors, and landlords in town. Those receiving the artificial increase will only benefit for an short period of time and the rest of Lawrence will bear greater costs.

Ken Meyer,


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