Wednesday, October 1, 2014

$15 minimum wage would hurt us all

By Jeff and Laura Ambrose

What a great idea — let’s all get paid more! What’s wrong with that?

While on its surface this may seem like a splendid idea, it rests on several untrue assumptions:

* People are forced to work in low-wage, dead-end jobs in perpetuity.

Indentured servanthood is a remnant of the past. Minimum wage was designed as a starting point for entry-level, inexperienced workers.
* Hard-working, experienced, valuable employees can’t rise above minimum wage. 

Any intelligent employer wants to keep valuable employees and understands the need for pay increases.
* A minimum wage job is a person’s (or family’s) sole source of support. 

Entry-level employees are usually dependents of others. It wasn’t intended to support a family. In addition, many minimum-wage employees earn tips, which are reportable income in California.
* The only way to get employers to pay more is to force them. 

In a free-market, competitive economy, it makes good business sense to retain your best employees by offering higher wages and benefits.
* There will be no effect on the general economy (ripple effect). 

This will affect every business and service in our economy, and inflation undoubtedly will be the result.

Employers can afford it. It’s just a little less $$ in their pockets. 

Profit margins are very thin for many companies, especially in the industries that tend to hire entry-level employees. Employers will have no choice but to increase prices and/or downsize through automation.
* It only affects the lowest-wage employees.
This affects everyone. Unless we adopt a communist agenda, we still believe that more experienced/educated/valued workers merit higher wages than entry-level workers. So an enormous increase at the lowest levels will force across-the-board pay increases.

There are several proposals in California to increase minimum wage by as much as 50 percent over current state mandates. This is an enormous cost burden for thousands of small businesses, and for any businesses in the hospitality, tourism, retail and restaurant industries.

It’s not just the wage increase, it’s subsequent payroll tax increases, worker’s comp increases (since these are tied to wages), and all types of supply and vendor cost increases. There is no doubt that this will contribute to inflation.

And whom does that hurt most? Those earning the lowest wages and those on fixed incomes. Is that what we want?

All but seven states pay lower wages for those in tip-earning positions. All California employers are forced to report their employees’ tips as taxable income, so as such, it should be calculated into the minimum wage.

The proposal to increase the minimum wage to $15 per hour in Davis puts this city in a particularly precarious position. It would force local businesses to compete with businesses just outside the city with much lower labor costs. There’s little doubt that consumers will choose to drive a few miles to neighboring towns when there is a significant cost difference. And new businesses most likely will choose these communities over Davis since it can no longer be competitive.

At Woodstock’s, we hire many entry-level, inexperienced employees. One of the advantages of restaurant work is the flexible scheduling we can offer, especially to students. All we expect is a positive attitude and willingness to learn.

We invest hundreds of hours in training our team. We believe in promoting from within, and we offer pay raises at least annually. We have offered health insurance and dental benefits to our employees for more than 20 years, and we share ownership with our management team.

As a small business, we emphasize fresh, handmade-to-order food, along with a friendly, fun environment. It’s the labor-intensive nature of our business that already causes us to charge more than the national chains. The proposed increase to $15 for minimum wage constitutes an 87.5 percent increase over what we currently pay. Since labor makes up 31.6 percent of our costs, it’s obvious that this will force us to increase our prices substantially and look for ways to automate.

The laws of economics indicate that as prices increase, less product is sold, which means that less labor is required. We can only hope that we can still sell some product at these inflated prices in Davis, but the hurdles will be enormous.

— ​Jeff and Laura Ambrose​ are the owners of Woodstock’s Pizza Inc.



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