Minimum wage rise in US could be positive for beauty industry
President Obama called for an increase in the federal minimum wage from $7.25 to $9 per hour by 2015 proposing it be indexed to inflation, so it would increase when the cost of living increases.
The Fair Minimum Wage Act of 2013 was introduced in the U.S. Senate and House of Representatives, and needs to be passed by both the Senate and the House for the increases to go into effect.
America's minimum hourly wage is far lower than its average hourly wage of US$19.8 in 2012, creating a widening income gap in American society.
According to Euromonitor analyst Carrie Lennard, the impact of the move would be overwhelmingly positive for America, and could give a boost to the cosmetics sector.
Positive for beauty industry
“The raise in minimum wage would be a positive for America’s FMCG industry as it would help to reverse the income gap and increase the spending power of low earners, who are predominantly young and have only secondary education,” she says.
“While this will be likely to have little impact on big ticket items such as cars and white goods, it should generate spending on beauty and personal care… an industry for which young people are key consumers.”
Lennard points out that it would help reverse its income inequality, boost consumer spending and increase labour productivity.
The move may also help to increase labour productivity as staff turnover would be likely to decrease, reducing inefficiencies caused by inexperienced staff and reducing recruitment costs for businesses.
A concern about the proposed raise in minimum wage is that it would increase unemployment among those competing for the lowest paid jobs in America, although Lennard believes this will not be the case.
Reshoring trend
The Euromonitor expert also points to a snowballing trend among American manufacturers of ‘reshoring’ jobs back to the USA which were previously outsourced to China and other emerging countries.
“Wage costs are a major factor in the trend. Labor costs are rising in China which is making the prospect of transferring manufacturing work back to the USA more appealing once transportation and shipping costs are also factored in,” she continues.
“If the minimum wage is raised in the USA, this could stop some low end manufacturing work being transferred back to America. On the whole however, the benefits of the proposed increase in the minimum wage would far outweigh the negatives.”
