CFOs are preparing for higher prices, shorter working hours and greater investment in technology, as they are faced with the possibility of higher payroll costs under the Biden administration.
President-elect Joe Biden has proposed an increase in the federal minimum wage from the current $7.25 to $15 in 2026. The wage increases would help low-income workers, Biden said before the March 3 elections. November.
He hasn’t spoken out on this issue since the Associated Press announced him as the winner of this year’s presidential election on Saturday. President Trump has raised a number of legal issues relating to the election results in several states.
Mr Biden’s transition team did not immediately respond to a request for comments on the minimum wage.
Whether or not Biden seeks a promotion, may have consequences for the party that controls the Senate. This should be clear in January, when the votes for two matches in Georgia are counted. The Democrats have a small majority in the House of Representatives, but if the Republicans win the Senate, they may have difficulty promoting legislation.
Subscribe to the newsletter
The Morning Ledger offers daily news and corporate finance information from the CFO Journal team.
Chipotle Mexican Grill Inc..,
Texas Roadhouse Inc.
are already doing mathematical calculations to estimate what a higher federal minimum wage could mean for their operations and cost base.
Some executives fear that federal wage increases could lead to higher wages at the federal level, damaging profits and forcing companies to look for savings to offset rising wage costs. Raising the federal minimum wage to $15 per hour could cost 1.3 million Americans their jobs last year, according to the Congressional Budget Office’s estimates, although it would raise wages by an additional $17 million.
According to the Bureau of Labor Statistics, by 2019 about 1.6 million U.S. employees – or 1.9 percent of all employees earning an hourly wage – will receive at least the federal minimum wage, an increase of 1.7 million the year before. Employees in sectors such as the hotel and catering industry or the retail trade generally receive a minimum wage, but sometimes also a lower wage if they receive a tip.
Potbelly, Chicago’s sandwich shop network, will initially respond to federal minimum wage increases through better simulating wage costs and increasing efficiency during working hours, CFO Stephen Chirulis said in a phone interview Monday. In the long term, the company will also consider increasing menu prices, the spokesperson said.
The increase in the minimum wage will certainly affect us, Mr Chirulis said. Potbelly pays an average hourly rate of $12. The company has refused to disclose the number of employees receiving a minimum wage.
The state minimum has remained unchanged since 2009, when it rose from $6.55 to $7.25. States can also set their own minimum wages, ranging from $5.15 in Georgia and Wyoming to $13.50 in Washington, which is currently the highest in the country. Twenty-one states now meet federal requirements. In states where the local and federal levels do not coincide, employees are entitled to a higher level.
In recent years, Texas Roadhouse, a restaurant chain in Louisville, Cai, has raised its menu prices to compensate for higher minimum wages in states like Oregon and Washington. The company stated that it had not experienced a decrease in the number of customers since the increase in the price of its menus.
The Texas-based roadhouse expects a gradual increase in the minimum wage, Tonya Robinson, head of the financial department, said in a March 28 phone interview. October on income. The company can raise prices after pay rises, although this does not happen automatically, a spokesperson said. Texas Roadhouse also wants to improve efficiency, reduce costs and increase sales to offset wage inflation, he said. The company refused to comment on the number of employees receiving the minimum wage.
Other companies may try to offset rising costs by investing in automation to increase productivity.
Covington, a distributor of pole materials in Laos, plans to increase its investments in technology to offset potential increases in labor costs. The company will look to reduce manual processes such as product orders and certain warehouse operations, said CFO Mark Jocelyn on December 26. October by phone.
This is the most important investment we can make… to reduce the impact of potentially higher labor costs in the future, Mr. Jocelyn said.
Chipotle Mexican Grill, another restaurant chain, pays an average of $12-13 an hour, said CFO Jack Hartung in an interview on 23. October. A federal increase to $15, even in increases, would raise the cost of a California company in Harbor Beach, if only slightly, he said.
If there was some kind of sudden spike to $15, I think it would hurt a lot of small businesses, Hartung said.
Last week, Florida was the eighth state to agree to raise the minimum wage to $15 an hour, an increase of $8.56 today. The state minimum wage starts next year with an increase to $10.
An increase at federal level, phased in over several years, will give companies time to adjust their cost base. The earliest increase in federal spending will take place in mid to late 2021 and is initially expected to be around $2, said Dante DeAntonio, Chief Economist at the time.
Analyst, subsidiary of Moody’s Corp.
Even companies that have not planned at all will still have time to implement this step gradually and to think about how to live with this progress, said Mr DeAntonio.
Write to Marc Maurer at [email protected]
Copyright ©2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8