Michigan youth working against bill that lowers minimum wage for young adults: Proposed bill would let employers pay people under 20 less than minimum wage

As a business owner maybe I can add a bit of rational for this bill.

Hiring an employee is not easy, it's not cheap, and it's really not fun. There are many costs involved and many laws and regulations that have to be taken into account every time you make a new hire.

Some things include background checks, credit checks (we don't do them but some companies do), paperwork, outsourcing any additional work, training, and time. It can take 50+ hours of work to make one new hire. Add all that up and you can wind up paying $1,000 or more to make a new hire.

So it's established that hiring is very time consuming and expensive. So much so that it often takes and few months of labor before the new hire is net-positive for the business.

For example.

A 16 year old new hire that we pay $10 an hour. They can only work 18 hours a week, they cannot work days because they are in school, and they have a very busy schedule that we will have to work around. Between payroll taxes, insurance, and all the other expenses that come along with an employee, we pay $20 an hour to have him in our shop. We also paid $800 to hire him and had to train him for a week with pay, another $350. If he can add $25 an hour to our production it will take 14 weeks before we see any profit off the hire, and that is assuming that he doesn't screw something up due to inexperience. And after he becomes profitable we will see ~$350 a month in profits from the employment.

Compare that to a 35 year old who is a head of household looking for full time employment. He can offer us a full time schedule with overtime, he has a work history, and he has an obligation to work because he has a family. For this guy we will pay him $20 an hour, our cost to employ will be $35 an hour and he can add $40 an hour to our production. If we pay the same amount to hire ($800) and the 20 hours of training ($700) he will become a profitable employee in 7 weeks. And create a profit of $800 a month for the company.

Now that example is for a hire that will add direct profitability to the company. But we also have positions that are not directly related to profits (running a machine), and more for overall effectiveness of the shop. I don't need one of my most skilled and proficient (and highest paid) employees sweeping the floor or running for parts and bits. I would prefer a non-skilled lower paid employee to handle those tasks. But there comes a point where it is simply not cost effective.

Example.

I have 5 skilled workers making $25 an hour, after payroll, insurance, and other costs I pay $50 an hour per employee or $250 an hour total payroll. They generate $80 an hour each in profits, for a net profit of $150 an hour. If my shop needs 20 hours a week of unskilled or unprofitable work (cleaning, finding things, moving things, shoveling snow, etc) , I have two choices. Let the skilled workers do the work and lose a percentage of production, or hire someone to do those tasks.

The problem is that when I delegate those tasks to the skilled workers, I typically don't see that same percentage drop in production, I don't lose 20 hours of production, I lose maybe 5 hours of production ($150 a week), but what I do see is a drop in moral. So the new hire would not be solely profit generating, they would be more of a "benefit" to my current skilled employees.

So what to do?

The new hire would save me $150 a week and make my employees happy. But add no profits to the company. And I need them for 20 hours a week. So if we hire a new employee, pay the $800 to hire, and the $350 to train, and that employee works for 20 hours a week, and offsets the $150 I would lose if they weren't there. I would have to have a total cost of employment of $7.50 an hour. Which would translate into ~$4.50 an hour pay once you include insurance and payroll taxes. And I would have to employ them for 4 months before their employment made any difference.

So purely from a hiring standpoint, this is a job that only exists if we can pay $4.50 an hour. The employee would make $90 a week and get work experience, and they would also get to work around $700,000 machines and get to rub shoulders with very skilled people who know what they are doing.

Or, we can just apply for an intern and not pay them anything and have them do the same thing. And they usually pay for that opportunity.

/r/Michigan Thread Link - mlive.com