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Minimum Wage’s Maximum Impact on Small Business

Minimum Wage’s Maximum Impact on Small Business

Each time the minimum wage debate resurfaces, I think of this quote from someone I know: “If your outgo exceeds your income, then your upkeep will be your downfall.”

Not long ago, the minimum wage issue was framed in terms of “labor vs. management,” much like union negotiations. But these days, every business owner I know wants to pay their employees more. But costs are a roadblock. 

The old paradigm “labor vs. management” is now a false dichotomy. The true issue has become: small business owner and employees vs. monetary inflation and increasing price of goods.

From a business owner’s perspective, keeping employees happy is essential. Turnover is costly. The interview and hiring processes, plus training and ongoing provisions is an investment. Add to that meeting payroll, including FUTA, SUTA, workers’ compensation, social security, Medicare, healthcare (if over 50 employees), plus the mortgage/lease, insurance, utilities, inventory, maintenance, and other costs not accurately captured in our current tax code — the emotional cost, risk and toll that business ownership can take on one’s personal life — and it’s easy to see the temptation of a small business owner to throw their hands up. 

In some cases, it can take selling $250,000 in product to make $20,000 — a net profit of 8%. It takes more and more money to make money. 

From an employee’s point of view, working 40 hours per week at Florida’s current minimum wage of $8.46 per hour yields a monthly $1,354 gross. The tipped minimum wage in the service industry is $5.44. Without tips, that’s $870 monthly before taxes. The costs of healthcare, medication, food, utilities, transportation, and personal needs added to housing far outweigh minimum wage income. An individual cannot survive long term on minimum wage. 

So, where does that leave us? The intent of those who advocate to raise the minimum wage is to raise the pay of the poor, which is a great cause. But, the real unintended consequences of significantly raising the minimum wage is job loss, meaning we have lowered the pay of the poor rather than truly giving them the advantage they need. So how can we raise minimum wage without putting everyone out of business? 

In 2004, Florida adopted a constitutional amendment that established a $6.15 minimum wage and indexed it to inflation. Every state sets its minimum wage, and tying it to inflation is wise. However, inflation as defined by the USDOL has been statistically manipulated so it doesn’t capture true inflation. The cost of living has increased, depending on location, between 8% and 14% annually, but wages and portfolios have not kept up. True monetary inflation and the true CPI are engulfing both business owners and employees, eating away at the wealth of our country. 

It is time we look to better measures, such as the Chapwood Index, to set our monetary policy as a nation and reframe the minimum wage debate. Until we address the root of our monetary issues, there will be no winners. In other words, we must address our monetary inflation and our CPI accordingly, or else our “outgo will exceed our income, and our upkeep will become our downfall.” 

 

As president and CEO of the Melbourne Regional Chamber of Commerce, Michael Ayers is a strategic leader with experience managing government agencies, political campaigns and community-based organizations. He has spent over 17 years in government relations, management, and political marketing throughout Washington, D.C., Illinois, Tallahassee and Brevard County. Michael started his career as a congressional aide and spent several years running political campaigns.

 

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