Total Compensation is Key in Minimum Wage Debate | Don Brunell

One of the problems with the minimum wage debate is the name itself. If we want to ensure that we don’t hurt lower-income workers, we should consider total compensation, not just wages.

One of the problems with the minimum wage debate is the name itself.  If we want to ensure that we don’t hurt lower-income workers, we should consider total compensation, not just wages.

Case in point:  Bill H. earns $15 an hour as a parking lot attendant.  Lisa W. earns $12.25 an hour at a fast food restaurant.  But Lisa’s employer provides merit raises, paid vacations, health insurance, management training, education scholarships, childcare assistance and a 401k retirement plan.

Who is better off?  Would it help or hurt Lisa if she lost all her benefits, but gained $2.75 an hour in wages?  We need to consider that question as part of any debate about the minimum wage.

The truth is raising the minimum wage is not as clear or as simple as some would have us believe.

Let’s leave aside for a moment the fact that no city or state has ever attempted to raise its minimum wage by 60 percent.  Most experts agree that the more extreme and abrupt the increase, the more economic casualties it creates – lost jobs and lost opportunities.

But as any employer knows, there is much more to employee compensation than wages.   According to a March, 2014 report from the U.S. Bureau of Labor Statistics, private-sector employers pay an additional 30 percent on top of wages for employee benefits such as Social Security, Medicare, workers compensation insurance, unemployment insurance, paid leave, health care, retirement, etc.

For example, the BLS reports that, while the average service worker makes $12.17 an hour, their benefits bring their total compensation to $16.95 per hour.

Because Washington’s current minimum wage is the highest in the nation, employer costs – and employee benefits – are likely greater here.

Take Dick’s Drive-In, for example.

An iconic Seattle-area institution for 60 years, Dick’s Drive-in provides good wages and generous employee benefits. According to Jasmine Donovan, granddaughter of founder Dick Spady, employees start at $10.25 an hour, receive regular merit raises, health insurance, $22,000 in scholarships over four years, child-care assistance, bonuses, paid vacations, a 401(k) retirement plan with a 50 percent employer match, and paid volunteer time at local charities.

 

These benefits push the total compensation for employees of Dick’s Drive-In above the targeted $15 per hour minimum wage.

But if the company is forced to bump wages to $15 per hour, it will not be able to afford the employee benefits it currently provides.  Donovan cautions, “Employees who earn higher taxable wages, but lose valuable tax-free benefits may end up worse off.”

The same is true for the employees of Burgerville restaurants.  Founded in the 1960s, Burgerville operates 39 restaurants from Centralia, Washington to Albany, Oregon.

Like Dick’s Drive-In, Burgerville management is focused on helping their employees succeed.

Employees who work their way into management positions get free management training, medical and dental insurance, a 401k plan with a company match, paid vacation, child care assistance and tuition reimbursement.

These benefits have value – value that must be considered in any discussion about raising the minimum wage.

What else should that discussion include?

Jasmine Donovan suggests that the minimum wage should increase with education and skill levels. High-school dropouts who earn a GED would get a bump in their minimum wage; high school graduates earn a higher wage.  Technical or management degrees net an even higher wage.

These steps not only recognize the added value of education and skills, they provide incentives for people to achieve those goals in order to get higher pay.  The skills and education they gain as a result will help them succeed throughout their lives.

Isn’t that what we really want?

Don C. Brunell is a business analyst, writer and columnist.  He recently retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at theBrunells@msn.com.

 

More in Business

Seattle’s misstep highlights need for new approach

Last week, Seattle’s City Council did an “about face” revoking the onerous… Continue reading

Washington’s expensive culvert court case

Too much money is spent in court where it should go to increasing the salmon population

Lt. Dan needs lots of helping hands

Gary Sinise formed the “Lt. Dan Band” in early 2004 and they began entertaining troops serving at home and abroad. Sinise often raised the money to pay the band and fund its travel.

New Enumclaw wine bar aims for broad audience

Bordeaux Wine Bar is scheduled to be open Wednesdays through Sundays.

Streamlining regulations makes more housing affordable

There were over 21,000 people homeless in Washington State last year.

New approaches needed to fight super wildfires | Don Brunell

Last year, wildfires nationwide consumed 12,550 square miles, an area larger than Maryland.

Skilled trade jobs go unfilled in our robust economy

Known as blue collar jobs, they routinely pay $45,000 to $65,000 a year or more.

Streamlining regulations helps Americans compete

The cost of regulations is a key American competitiveness issue. It is a major reason our companies re-locate to other countries and our manufacturers and farmers have difficulties competing internationally.

Water pressure mounting in West as population spikes

What is happening in California with water allocation disputes is a harbinger of what is to come in our state as well.

Railroads implementing positive track

While the investigation continues into the deadly AMTRAK derailment near Dupont, the clock continues to tick on the implementation of Positive Track Control (PTC). The deadline is Dec. 31, 2018.

Keep the holiday spirit all year long | Don Brunell

During the holidays, our thoughts naturally turn to giving — not just giving gifts, but donating our time and money to charities, disasters and community programs.

Finding balance in occupational licensing

Recently, the Institute for Justice (Institute) determined state licensing barriers for lower-income workers and aspiring entrepreneurs not only hurts people trying to establish themselves in a profession, but annually drives consumer prices up by $203 billion.