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Minimum Wage – A Construction Perspective

The minimum wage debate has been raging, without a ton of fanfare, in Washington D.C. Recently, Seattle, WA voted and approved a minimum wage hike to $15 an hour, to be raised gradually over time. Workers rejoice, businesses groan, but what does this mean?

Obviously, unless you are a waiter/waitress, or some other job that receives tips, or you are some sort of apprentice/trainee, you will start out at $15 an hour. What does this mean for skilled laborers though?

Personally, I work in the construction field, mostly office work and small to mid masonry projects, as well as some small to mid level carpentry and other related construction projects – mostly on historic homes. This means: I have had, and those who work with me have had – on the job training, have more then basic math skills, have some knowledge of structural engineering, historic techniques and processes, work and coordination skills with others (fellow workers, subcontractors, project managers and home owners), know terminology, can read engineering and architectural drawings (and understand them), and have job management skills. Obviously, each person that I work with is different with each of these skills, and many others – from swinging a hammer, to mixing mortar from scratch, to figuring costs of labor and materials, etc – and that is, again, obviously apparent in scale of pay. Likewise, so is experience. Personally, I get paid better then what Seattle has approved for minimum wage, but not everyone who works for the company I work for does, nor does everyone who works in construction – but in a few years, if this company was in Seattle, they would. So what does this mean?

Examples: (Hypothetical) Here are some examples, not to be taken as a literal picture of the company I work for, but as a hypothetical.

General Labor –
Labors: (5) $10.00 an hour
Skilled Labor: |
Carpenter: (3) $20.00 an hour
Masonry/Tile (2) $18.00 an hour
Painter: (4) $15.00 an hour
Foreman: (1) $25.00 an hour

That is 20 employees, if all worked 40 hours a week, payroll would be: $9,240.00
This does not account for office employees, etc.

If everyone received a 50% increase (because the laborer did, payroll would be: $13,860
Again, no office employees, or insurance costs, that is an increase of $4,620, which over one year is an increase of $240,240.00… wait, how much? Yep. Granted, all employees would not receive the same pay, nor would all receive a 50% hike, but you most certainly have to give your painters a raise – general laborers are not expected to paint, then you would mostly certainly have to give your masonry/tile guys a raise (you paid them more then the painters for some reason) and then you would have to give your carpenters a raise (just ask a carpenter why 🙂 ), which means you would have to give your foreman a raise as well – I mean, he is the foreman. This not only raises payroll – and yes, makes the workers happier, but it also increases expense, which in turn will raise cost. If a job is expected to last six months, and it is expected that all of your workers will be on the job everyday, 40 hours a week, that would mean an increase of $120,120.00 just in labor, if you add in 20% for profit and overhead, that is an increase of $144,144 (based on the 10% overhead. and 10% profit standard). That does not take into account if suppliers and lumber yards are effected as well. So, in labor alone, you have an increase in cost of over 50%, plus you will undoubtedly will have some sort of increase in material cost.

To put this in perspective, if you have a $500,000.00 job that will take six months, you are now looking at a $650,000.00 job, and that increase is just in labor. That is a lot of money, especially when a lot of those jobs are subsided through grants and special loans.

I’m not against raising the minimum wage, and maybe the only reason I think this way is because I do the majority of our companies estimates. This has the potential to not just burden the business owner, but the home owner as well. Beyond that, it has the potential to burden the worker, because a lot of businesses will not be able to justify such a large increase in cost, therefore causing workers to either be laid off, laborers (or equivalent) not being hired, or skilled workers not being paid a fair wage as compared to the laborer.

 

 

 

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