Memorandum

To: Ms. Maria Vint

From: Mikhail Broomes

Date: 12/03/2019

Subject: Solutions to the impact of minimum wage for businesses

Summary:

Since the government is pushing to increase minimum wage within the United States,
businesses are making adjustments to by ‘scaling up’ to offset the increased expenses from
minimum wage. This change has been counterproductive as it has caused many workers to
lose jobs and shut down many businesses; Moreover, this has caused inflation so those who
work for a little more are also affected. In order to prevent these repercussions alternatives such
as tax reform and implementing policies were discussed as a solution to the increase in
minimum wage. The tax reform would see an increase in business’s profits as they would be
able to keep more revenue with reduced taxes based on the revenue bracket of that business.
Also a policy would be changed so that large businesses who have way above the profit margin
to increase pay their minimum wage workers can face repercussions if they close or lay off
workers to maximize profit.

Introduction:

Businesses have had to adjust since the increase of minimum wage for their minimum wage
workers. Businesses can either inflate prices of their items or they can let go of employees to
cover for the increase in labor. The Congressional Budget Office projected that a minimum
wage increase from $7.25 to $10.10 would result in a loss of 500,000 jobs. New small
businesses are also at risk of failing because it would be more difficult to pay their employees or
have less workers to be efficient, 60% of small-business owners say that raising the minimum
wage will hurt most small-business owners," according to a 2013 Gallup poll.

This is a major concern because it is counterproductive as evidence was shown in the research,
where the minimum wage has inflated cost and also hasn’t helped with the poverty within that
area. History has shown the impacts of increase in minimum wage, since $15 minimum wage
went into effect in New York City, business leaders and owners say the increased labor costs
have forced them to cut staff, eliminate work shifts and raise prices according to the Wall Street
Journal. This also shown in other cities like Chicago where they suffered the same result.
History has shown that the increase has done more harm than good.

The proposal that I have suggested is to have the government to adjust the taxes and policies
for business (big and small respectively) to make it easier for businesses to pay their employees
increased minimum wages without ‘scaling up’ or closing down their businesses. This should be
effective because forcing the businesses’ hands will not solve anything but the government can
make it easier to transition into paying the increase so that there are any repercussions.

Proposed Solution:

By reforming the policies and taxes on businesses so that they can have more revenue to
subsidize for the increase in minimum wage. Since the survey was taken in New York City I will
be using the NYC tax code. According to Investopia the state of New York makes a few esoteric
adjustments to this amount and taxes the resulting amount at 7.1%. However, small businesses
with net incomes of less than $290,000, along with qualified manufacturers, get a bit of a break,
paying only 6.5%. Businesses with net incomes of less than $390,000 pay only 6.5% on the first
$290,000. The government should include tax reductions as they push to increase minimum
wage. Reducing the taxes by 1-2% can create extra revenue to cover the extra expense of the
increase. This will prevent business from having to cut back on workers and increasing prices of
their products and services.

For big businesses who have tons of extra profit but choose to be greedy and cut back on
employees can enforce a policy where large businesses cannot cut back on workers. If
businesses after all their expenses are calculated and their profit does not fall into a range
where it can affect the business after the increase in minimum wage then companies shall face
repercussions if they increase prices and cut back on employees such as increased taxes with
co-operations who have large profit but do not have a certain amount employees as they should
to maximize efficiency.

Also the government and large co-operations can offer a variety free special training programs
to their minimum wage workers so that they can easily be able to develop skills that would make
them able to move on to better paying positions within their company. The programs can be up
to 6 months of specialized training that can be prepare workers for greater responsibilities thus
more pay This can help minimum wage workers from feeling stuck and make it easier instead of
struggling to work and go to school as a lot of them do.

Budget:

Since this is a proposed solution that is dependent on the government, the information on the
budget cannot accurately be accessed and there is no way to calculate how the changes will
affect the overall economy. Congress recently passed a bill to increase the minimum wage to
$15 by 2024 but there is no clear indication as to how much it will cost so it is hard to calculate a
budget. As for the special training this can cost millions of dollars within the national budget but
it can help them in the long run as more people are able to easily transition from low income
jobs and there won’t be such a huge push to keep increasing the minimum wage and running
the risk of greater unemployment risks and more inflation.
Conclusion:

Minimum wage workers are indeed struggling to make ends meet so it is understandable that
the government would want to increase the minimum wage. However, history shows that this
has caused workers to lose jobs, businesses to shut down and inflation. Minimum wage is not a
bad idea but the government can be smart about how they implement policies so that everyone
can benefit. My solution to reduce taxes can give businesses more revenue to pay employees
and be able to keep their businesses afloat without scaling up. Also changing policies for large
businesses who have a large amount of profit to increase wages without any harm to the
business can prevent major job losses and also prevent them for scaling up. Offering training to
employees can make it easier for minimum wage workers to move up in positions and make it
easier to earn more to cover expenses. Although the minimum wage looks like it is going to be
increased, there are ways to offset the serious impacts it has on the entire US economy.