As each day goes by there are new provisions of the Affordable Care Act that impact Floridians. The most recent has been discovered by the Heritage Foundation. In a column titled “Obamacare and a Minimum Wage Hike Pricing Many Unskilled Workers Out of Their Jobs” James Sherk and Patrick Tyrrell write, “The [federal] government has already effectively raised the minimum wage above $10 per hour—without benefitting workers.”
Sherk and Tyrrell note, “Obamacare requires many employers with 50 or more employees to offer qualifying health coverage to their full-time workers. This health coverage is expensive. In 2015, it will add $2.24 per hour to the cost of employing a worker with single coverage. Those that do not provide coverage face a fine of $2,000 per employee per year (after the first 30 workers) that comes out of after-tax dollars. This equates to a $3,279 increase in pre-tax payroll costs—$1.64 per hour. The Administration has delayed the mandate’s implementation until 2015. When it takes effect, it will increase the cost of hiring unskilled workers.”
Table 1 below, courtesy of Heritage, shows the impact on Florida and the other states of this mandate. It shows minimum hourly employment costs for full-time workers in 2015, the year the employer mandate takes effect. In Florida full-time employees with qualifying health benefits will cost their employers at least $10.97 per hour (with single coverage). Employers who opt to pay the penalty instead will nonetheless pay at least $10.57 per hour for labor. Both are higher than the national average.
“From an employer perspective, the government has already raised the minimum wage above $10 per hour. In 2015, full-time workers who produce less than $10.30 per hour will, on net, cost their employers money. This will make it much harder for inexperienced and unskilled workers to find full-time employment. Businesses will not hire workers at a loss,” state Sherk and Tyrrell.
So how will Florida business deal with this increase in the minimum wages?
Sherk and Tyrrell suggest, “Businesses would respond by finding new ways to lower their labor costs. Part of this would involve replacing labor with capital, shifting to automated systems wherever possible. This could take many forms, such as increasing the use of the automated cashiers that have become common in stores across the country. Or it could involve the widespread adoption of newer inventions such as the Alpha, a robotic hamburger maker that cooks over 300 gourmet burgers per hour.”
Florida’s economy is based primarily on tourism, agriculture and construction. Automation does not fit these industries well. Fixing beds and cleaning toilets in hotels cannot be automated. Picking oranges and other citrus products require manual labor. Building a home or commercial building requires skilled labor.
While Governor Scott is working to diversify the economy by making the state pro-business a rise in the minimum wage can be damaging. Scott has focused on reducing regulation, taxes and litigation. This minimum wage by fiat may negate his efforts.
EDITORS NOTE: James Sherk is Senior Policy Analyst in Labor Economics and Patrick D. Tyrrell is Research Coordinator in the Center for Data Analysis at The Heritage Foundation.