One of the most fundamental laws of physics is that every action has an equal and opposite reaction. In more generalized terms, this means that one action affects another, and every act has a consequence, intended or unintended. What does this mean from an economic perspective? Currently, politicians in Washington are debating increasing the minimum wage to help workers rise out of poverty. Sounds good, right?
But when we remember Newton’s law, we have to think about the consequences that could come from raising the federal minimum wage. The Congressional Budget Office estimates that this move might pull close to a million workers out of poverty, but could also hamper hiring by as much as half a million or cause a 0.3 percent decrease in employment.
Payroll Factoring Can Help Businesses Pay For Wage Hike
To cover the costs of the higher wages, businesses would have to increase product pricing, hire fewer workers or maybe even terminate existing employees. It is likely that small business funding would be needed to help companies pay these higher salaries as a result of the law.
Ultimately the long term effect of raising minimum wage could result in higher prices overall and a likely rise in inflation. As such, the purchasing power gained from the higher wages could be evened out due to inflation. In other words, people might be earning more but their dollar wouldn’t go as far.
Meet Financial Obligations by Factoring Receivables
Small businesses more than likely would be hit harder by a minimum wage increase due to the high costs of payroll, employment taxes, hiring, and more. In addition to paying the higher payroll, small businesses would have to pay higher taxes. Some states such as New Jersey and California recently increased the minimum wage for workers and many businesses across the country are preparing for a federal wage hike.
Small businesses financing in the form of factoring accounts receivables or invoice factoring is readily available from invoice factoring companies. Businesses that need cash to improve cash flow, cover payroll, or pay for other operational or tax expenses can turn to payroll factoring to get same-day cash.