2 Senate Democrats recently proposed legislation that would REQUIRE business to pay $0.50 per hour into an employee retirement savings account.
“Noting that 3 in 10 workers lack access to a workplace retirement plan and that 4 in 10 adults do not have enough liquid savings to pay a $400 emergency expense, Sens. Amy Klobuchar (D-MN) and Chris Coons (D-DE) introduced legislation that calls for a hybrid emergency savings and 401(k)-type government-run program. Klobuchar is seeking her party’s nomination to run for president. ” (click here for more)
Lets examine this for a moment. For an employee making $10 an hour, thats a 5% employer contribution. At $15 an hour, its a 3.3% contribution. Currently SIMPLE IRA’s match 3% (there is no requirement for the employee to contribute in the bill), and Safe Harbor 401k plans match up to 4%.
As I see it – already being required in some states to raise hourly wages to $15 an hour, and then adding this in, changes the equation for employers substantially. Lets say an employer has 30 employees at $10 an hour currently, and are mandated to raise their employees just to $12 an hour, and add this contribution. Thats another $156,000 a year to the employer in expenses, a clearly unfunded mandate.
How will this get paid? Well the employer could eliminate 6 jobs to cover the expense. If they are in a business with, say, a 10% profit margin they would have to raise revenues by $1,560,000 just to cover this expense. So this either ends up with higher unemployment, or price inflation. This stuff isn’t free, folks.