Cost matters when businesses hire | Don Brunell

It’s not just wages, but benefits, that companies must consider when hiring or retaining workers.

While both sides argue over the merits of Seattle’s escalating minimum wage, there are other issues, such as the total cost per worker, which enter into hiring equations.

When employers look to add or retain workers, they must not only consider wages, but the added required benefits which they must pay for each individual they employ. They must keep costs on par with their competitors, because employees are a big part of their operating costs.

According to a U.S. Bureau of Labor Statistics (Bureau) report issued last September, wages account for just over 68 percent of total reparation while benefits such as paid leave, unemployment and worker compensation, health insurance, vacation days and retirement are among the 32 percent of the added expenses.

As the debate over minimum wage has morphed into an argument over “livable wage,” proponents in Washington State started pushing for automatic annual increases in starting wages. In November 2016, voters in Washington approved Initiative 1433 incrementally raising the state’s minimum wage from $9.47 to $13.50 by 2020 and mandating employers to offer paid sick leave.

However, the City of Seattle began phasing in the base worker hourly wage of $15 per hour for individual companies or franchises with more than 500 employees and $12 for small business.

This year, Seattle’s minimum wage rose to $15.45 an hour for the big companies and rises to $16 next year. For smaller job providers it is $14 per hour and increases to $15.

The critical question is how those wage mandates are impacting employment, particularly low-wage jobs.

According to University of Washington studies, Seattle’s low-wage payroll shrank. “The new report, which examined workers already employed showed some earnings gains,” the Wall Street Journal editorialized. However, the missing piece is forgone jobs.

The Journal said the UW report authors “point to a marked decline, about 5 percent, in the number of people entering Seattle’s low-wage workforce each quarter.”

Nationwide, employer (public, private and non-profit) costs for an employee averages $36.22 per hour. Wages and salaries averaged $24.72 an hour while benefits costs averaged $11.50 and those outlays do not account for housing, equipping and training workers.

Interestingly, the Bureau found total hourly compensation for private industry is $34.19

while state and local government workers averaged a whopping $49.23.

The “1,000-pound gorilla” in the equation is automation—more specifically robots. “Jobs that don’t require advanced education will be replaced by automation, displacing low-wage, low-skilled workers,” Market Watch reported last May. “One third of able-bodied American men between 25 and 54 could be out of job by 2050, contends the author of “The Future of Work: Robots, AI and Automation.”

“We’re already at 12 percent of prime-aged men without jobs,” said Darrell West, vice president of the Brookings Institution think tank, at a recent forum in Washington, D.C. That number has grown steadily over the past 60 years, but it could triple in the next 30 years because of new technology such as artificial intelligence and automation.” according Market Watch.

West added: “A lot of things can be done to avert such a problem and rethinking education is one of them. Schools need to change their curriculum so that students have the skills needed in the 21st century economy.”

The bottom line is jobs that don’t require advanced education will be replaced by robots, displacing low-wage, low-skilled workers.

Finding a living wage job is important to our country. People need work which provides money for rent, utilities and groceries and upward mobility. The key is arming Americans with the skills they need to keep our employers cost competitive.

Don Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, after over 25 years as its CEO and now lives in Vancouver. He can be contacted at TheBrunells@msn.com.

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