Posted on Oct 25, 2014
The Moral Hazard of the Payroll Taxes and of Minimum Wage
5.52K
7
6
3
3
0
For every employee an employer hires at $7.25/hr (minimum wage), the employer pays *at least* $17,342 per year. That doesn't include unemployment insurance, worker's comp contributions... so "at least."
The full time employee, only sees $11.009.75 annually.
If the FICA and MICA taxes were dropped, and the employer's costs kept constant--with the money formerly taken from the employer and the employee now going to the employee, the wage would be $8.34 per hour, which is $15,194.45 annually after taxes.
Someone earning $20,000 ($14,435.75 after tax) now could be paid $23,000 ($20,003.75 after tax) with no additional cost to the employer.
For a household earning the US median for 2013 of $ $51,939 ($35,307.15 after tax) now could be paid $59729.85 ($48,941,14 after tax) with no additional cost to the employer.
Increasing the minimum wage to $10.00/hr will result in an annual employer cost of $23,322 per employee. The employee will only receive $15,013.75. The employer will have to cut workforce by 1 of 4 to keep payroll costs equal.
Increasing the minimum wage to $15.00/hr will result in an annual employer cost of $35,880 per employee. The employee will only receive $22,293.75. The employer will have to cut workforce by 1 of 2 to keep payroll costs equal.
The full time employee, only sees $11.009.75 annually.
If the FICA and MICA taxes were dropped, and the employer's costs kept constant--with the money formerly taken from the employer and the employee now going to the employee, the wage would be $8.34 per hour, which is $15,194.45 annually after taxes.
Someone earning $20,000 ($14,435.75 after tax) now could be paid $23,000 ($20,003.75 after tax) with no additional cost to the employer.
For a household earning the US median for 2013 of $ $51,939 ($35,307.15 after tax) now could be paid $59729.85 ($48,941,14 after tax) with no additional cost to the employer.
Increasing the minimum wage to $10.00/hr will result in an annual employer cost of $23,322 per employee. The employee will only receive $15,013.75. The employer will have to cut workforce by 1 of 4 to keep payroll costs equal.
Increasing the minimum wage to $15.00/hr will result in an annual employer cost of $35,880 per employee. The employee will only receive $22,293.75. The employer will have to cut workforce by 1 of 2 to keep payroll costs equal.
Taxes
Employment
Minimum Wage
Posted 10 y ago
Responses: 3
1
1
0
By employer's cost remaining constant, does that mean the employer still pays their 7.5% FICA on the employee, but the employee's is dropped?
**Edit: Also, what is MICA? I've never had a deduction with that label. As best I'm able to find, that appears to be a Maryland thing.
**Edit: Also, what is MICA? I've never had a deduction with that label. As best I'm able to find, that appears to be a Maryland thing.
(1)
(0)
MSG (Join to see)
No. Both are dropped and the employer pays all of it to the employee in wages. Constant cost to the employer, maximum pay to the employee.
MICA is Medicare withholding.
MICA is Medicare withholding.
(0)
(0)
SGT Richard H.
Makes sense. The down side is that Social Security now has no funding. I know, I know, we should be taking care of our own retirements, but how many people really are? One of the favorite mud-sling lines of politicians is telling everyone that the other guy is planning to take away your social security.
There are a ton of parts to this. One is that SS *should* have enough to cover everyone that has paid in if we stopped it right now and went another way. The problem is that it doesn't. It was set up as *untouchable* when it was created....then they touched it...again and again. Now it's bankrupt and just another tax. Could it be fixed? Maybe. It would take at least a generation to do it, though.
There are a ton of parts to this. One is that SS *should* have enough to cover everyone that has paid in if we stopped it right now and went another way. The problem is that it doesn't. It was set up as *untouchable* when it was created....then they touched it...again and again. Now it's bankrupt and just another tax. Could it be fixed? Maybe. It would take at least a generation to do it, though.
(1)
(0)
PO3 John Wagner
Social insecurity. If all the dollars that I paid in were put into an ira with a 5% annual return I would be one well off dude,when I retire. Of,course,theymare,not.
The biggest cheat with social security is that you have no solid access to the money. It is doled out to you as long as you live. How many years does the average individual collect? Not so many. It's almost as,big,of a,rape as the union pension which I won't be getting.
The biggest cheat with social security is that you have no solid access to the money. It is doled out to you as long as you live. How many years does the average individual collect? Not so many. It's almost as,big,of a,rape as the union pension which I won't be getting.
(0)
(0)
0
0
0
Yep. And the least productive will immediately find themselves unemployed. They will not have been "fired for cause" as a rule. Therefore they will be lining up for unemployment benefits. Benefits which of course must be increased to reflect the higher minimum wage. Which will of course reflect the employers contribution which must even go higher.
And so on and so on. So eventually we get what every other socialist shithole in the world has.
People who can have almost as much for doing nothing as for working full time.
Perfect.
And so on and so on. So eventually we get what every other socialist shithole in the world has.
People who can have almost as much for doing nothing as for working full time.
Perfect.
(0)
(0)
Read This Next
Continue with Facebook 
Continue with Google