Minimum wage…too low or too high?
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By T.J. Reilly
President, Oregon Small Business Association
Almost everyone once worked at a minimum wage job. This is where most of us learned our first basic workplace skills. Many of us received the training that launched us into the careers that we have today. The low minimum wage we received enabled our employer to hire us when we had absolutely no previous employment experience. If you were like me, the low minimum wage you received pushed you to acquire additional training , or to pursue a different career.
I think it’s important to put a face on today’s minimum wage earner.
Less than 1% of Americans currently make minimum wage and 1/3 of those are ages 16 to 19. These teenagers generally have no previous work experience and are not qualified for higher paying jobs. Others are retired people who are just looking for something to do. You will find them working in boutiques, coffee shops and many other low profit businesses that we all enjoy patronizing. While we sympathize with those workers who have chosen to not better themselves and are barely getting by, the question becomes whether we should allow natural market influences to determine wages, or should we artificially dictate them. Should minimum wage be a career goal or just an interim training opportunity? The more important question is whether small business can actually afford to pay a higher minimum wage.
Without a reasonable minimum wage, many of these businesses will simply cease to exist. We are already seeing this happening in cities like San Francisco and Seattle.
Since Seattle has instituted a $15 minimum wage they have seen full time workers cut back their hours so that they don’t lose their government handouts. Are we helping or hurting the American dream?
So let’s take a look at some actual small business statistics.
Did you know that 99% of all businesses are classified by the US Govt as a “small business”? The people pushing for $15/hr look at the 1% of business who’s CEO’s are making 10 to 20 million a year. To be honest and fair we need focus on the 99%, not the 1%.
Did you know that only ½ of all new businesses will still be around in 5 years and that after 10 years only 30% will be left? Having a highly successful and profitable business is akin to winning the lottery! If every business were successful and profitable then we absolutely should raise the minimum wage! The problem is that they’re not.
Here are some of the issues that affect small business owners.
Did you know that if you are a sole proprietor and your business fails that you can’t collect unemployment? Did you know that if your business is not profitable you don’t get paid overtime, vacation pay, holiday pay, sick pay or paid health insurance. In fact, you might not even get a paycheck!
Many years ago my younger brother was working for a printing company. After he had been there for a year he asked his boss for a raise. He wasn’t expecting the answer he got, “you’re currently making more money than I am. I’m sorry I can’t.” A few years later that company was out of business. As a small business owner myself, I have personally experienced the exact same scenario. During my first 10 years in business I had several employees who made more money per hour than I did. It’s not uncommon for a small business with many employees to lose thousands of dollars in just one month, while at the same time paying thousands of dollars in associated payroll taxes. That’s right, small businesses pay taxes even when they are not profitable. They might not pay income taxes, but they pay a lot of other taxes.
Small business owners are not huge corporations with stockholders and millions of dollars in assets. Small business owners are your neighbor next door, your friend, dad, mom, brother or sister. They are your son or daughter that you mortgaged your house for, so that they can pursue their dream. These people risk everything and almost 100% of them once worked for minimum wage.
This is a very real situation for most small businesses. It’s not uncommon for a person to invest $100,000 or more to start a small business, only to lose everything. The average small business owner would make more in wages and benefits working for our government or a large corporation. Yes, there are those who are extremely successful, but once again the odds of that happening are similar to winning the lottery.
I know 2 different people who own Subway franchises. They don’t know each other, but they both told me the same thing. They have to own several stores to make a living and that’s with the current minimum wage. As minimum wage increases, a lot of the small stores that you enjoy doing business with are going to disappear.
Once again, the underlying assumption is that small business owners ALWAYS make a profit and that the profit they make is excessive. This is clearly false! I have personally had months where I had to borrow money to keep my company going. I’ve even had years where my credit card fees (the fee the credit card company charges me to take your credit card), was more than what my company made.
If you own a small business and make a mistake on your employee’s wages (whether intentional or unintentional) you can be sued and ultimately lose your business. If your employee steals from you, you have very little recourse except to fire him. Your employee then gets unemployment. If you lose your business you don’t!
I personally know a restaurant owner who’s employee stole over $75,000 from him over the course of several months. He had solid documentation to prove it, but the district attorney refused to prosecute. If this restaurant owner had cheated this same employee out of a few hundred dollars of overtime, he would have been prosecuted and sued for thousands of dollars.
If you damage your employee’s car you have to pay for the damages. If your employee damages your car while on duty, you cannot legally require him to pay for the damages.
Are there opportunities to make more than minimum wage?
My son-in-law recently got a job driving a truck. His truck driving school was only a 3 weeks program! Within a year he was making enough to qualify to buy a house. …and he did!
I recently saw a billboard advertising nursing jobs for $59 an hour, not $15, but $59! Did you know that there is an abundance of good paying jobs if you’re willing to learn? Many industries currently have a shortage of qualified workers, so why do we want to encourage people to not better themselves? I think this issue is akin to the sign in the park that says: Please don’t feed the animals. It creates a sense of dependency.
So the question today is, how do we encourage the American dream?
Will raising the minimum wage help or hurt the 99%