Opinion

Raising the Minimum Wage Isn’t a Death Knell for Business

Raising the Minimum Wage Isn’t a Death Knell for Business

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Whether it’s federal spending, gay marriage or gun control, we are a divided nation when it comes to hot-button issues.

fix san diego opinionBut there’s one — which is up for review Monday by a San Diego City Council committee — on which we as a country almost unanimously agree: the need to increase the minimum wage.

According to a recent national Gallup poll, 87 percent of Democrats, 72 percent of independents and 53 percent of Republicans approve of raising the federal minimum wage. As the CEO of a business with 300 employees, it might seem counter-intuitive for me to side with the masses on this point, but I’m all for raising the rate. Let me explain.

Right now, the federal rate is $7.25 an hour. Taking inflation into account, a worker earning that in 2014 is worse off than one who made the base hourly wage of $1.60 in 1968.

Fortunately, 21 states mandate a higher rate, and California is one of them. Our state minimum wage is $8 per hour, but on July 1, it’ll move to $9. Starting Jan. 1, 2016, it’ll be an even $10.

READ MORE: A Reader’s Guide to the Minimum Wage Push

The call to bump up the rate has reached a fever pitch in recent weeks and that’s largely due to President Barack Obama’s call to give low-income Americans a raise. If Obama gets his way, the federal minimum wage would jump to $10.10, a move he says is needed to more closely reflect a living wage.

Some of San Diego’s political and labor leaders have pushed for an even higher wage in America’s Finest City that could outpace the planned state increases.

Unfortunately, business leaders from trade associations, chambers of commerce and even some of my fellow CEOs have come out publicly against a raise in the federal minimum wage and any attempt by San Diego’s government to improve on California’s minimum.

I respectfully disagree with my colleagues in the business community. Opposing an increase in the minimum wage is a failure to recognize the value of our human resources, and the positive effect they have on our region’s economy.

The most popular argument against a minimum wage hike is that small businesses will make less money and in turn, will have to collectively lay off millions of employees.

That argument ignores economic reality. The vast majority of minimum wage workers aren’t employed by small businesses. In fact, most small businesses pay their employees above the minimum wage. In all, two-thirds of America’s low-wage workers are currently employed by large companies with 100 or more employees.

READ MORE: Meet the Anti-Minimum-Wage Group Funding Those Minimum-Wage Studies

Of the 50 largest employers of these minimum-wage workers (Walmart, KFC, McDonald’s, etc.), more than 90 percent were profitable last year. A raise in the minimum wage would hardly make an impact worthy of layoffs.

Raising the minimum wage makes social and fiscal sense for two main reasons.

First, economist James Galbraith says raising the minimum wage would increase the income of a staggering 28 million Americans, most of them women. Women currently work these low-paying jobs to a much greater degree than men, so they would see the greatest impact.

Second, many economists and legislators point to various bellwethers, like a general increase in home prices and a decrease in unemployment claims, to suggest we are recovering from the recession. While this may be true, what is definitely true is that it won’t be the wealthy and super wealthy who will benefit from an increase in the minimum wage. It will be the low-income wage earners and the middle class who currently make below $10.10 per hour. With an increase in the minimum wage, these 28 million Americans will now be able to spend more on essential and non-essential goods.

This kind of consumer spending is what greases the wheels of our economy, and gets it moving in a measurable way.

The vast majority of the 300 employees at my company are entry-level, and I can tell you that paying a living wage results in better attendance, less turnover and improved morale, performance and productivity.

In other words, the very foundation of a profitable enterprise.

Gabriel Bristol is CEO of Desert Call Connection. Bristol’s commentary has been edited for style and clarity. See anything in there we should fact check? Tell us what to check out here.

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15 comments
DKLC
DKLC subscriber

Minimum wage should be set per city/county, not per state. What about a tiered or step system? Brand new workers would get minimum wage step 1 when they first enter the workforce and can "step up" as they continue. Step 2 after a year. Step 3 after another year, etc.

We also need to look at the basic cost of living per city. It’s difficult for me to understand why rent, food, gas, etc gets more expensive every year, but the average pay workers are getting isn’t keeping up.

And the disparity of pay in this city compared to the same job elsewhere is concerning. Retail Sales employee (same employer, same employee): Nashville $15.00 an hour. San Diego: $10.00 an hour.

Idea: rent control in San Diego:

"By allowing tenants who are meeting their obligations (including paying the legal rent) to remain in their homes instead of moving, rent control may reduce instability and associated external costs. For example, in times of economic crisis, bank foreclosures have produced uneconomic vacancies including lost rental income, attracting nuisances, vandalism, and increased crime, adversely affecting local property values.

Rent control is considered necessary by the state of New York[26] to protect the public and to prevent landlords from imposing rent increases that cause key workers or vulnerable people to leave an area. Maintaining a supply of affordable housing is believed to be essential to sustaining the local society.[27] Homeowners who support rent control point to the neighborhood instability caused by high or frequent rent increases and the effect on schools,[28] youth groups, and community organizations when tenants move more frequently."  

http://en.wikipedia.org/wiki/Rent_control_in_the_United_States

Bit-watcher
Bit-watcher subscriber

Sez who?  

If 71% of those polled say that jumping of a cliff is a good idea, I encourage all those so inclined to follow their lead. 

Bill Bradshaw
Bill Bradshaw subscribermember

Who claims that the minimum wage is a “death knell for business”?  This is a straw man.

The two arguments I’ve heard are (1), that it will decrease the number of low skill jobs available, and (2) if San Diego puts in a higher minimum wage of it’s own rather than wait for the new California minimum to kick in and/or a much higher minimum at the federal level, that it will hurt San Diego businesses that compete with similar firms in other cities in the county.

This second argument seems particularly appropriate in fast food joints, auto parts and tire stores, and other firms that sell standard products.  Why patronize your local Bev Mo, Staples or Radio Shack when it’s counterpart in, say, La Mesa or El Cajon can beat their prices because of lower labor costs?

As for Mr.Bristol’s firm, Desert Call Connection, I can’t help noticing that, according to it’s web site, it’s headquartered in Las Vegas.  Bristol has outsourced a number of jobs to India, The Philippines and Eastern Europe, according to an October newspaper story, and he’s apparently struggling to keep his San Diego operation in Kearney Mesa operating.  To his great credit, he employs a lot of veterans and seeks them out for openings in his firm, so to this humble scribe, he’s a real hero!

-P
-P subscriber

A couple years ago San Jose raised their minimum wage 25%,  $8 to $10 p/h. Over the course of the next year their unemployment went down just over 23%, and the number of businesses increased. Other cities, such as Washington D.C. and San Francisco also have had their unemployment go down after they raised their minimum wage.

shawn fox
shawn fox subscriber

A one size fits all minimum wages is nonsensical.    States and local communities are all different, and are all setting their own minimum wages.  Therefore the argument for whether to raise it or lower it federally is rather pointless, unless federal employees are somehow unaffected by state and local minimum wages.   From a political strategy standpoint, the Republicans are fools for not raising it once, and pegging it to an index of some kind.  The republicans have no chance of winning this argument regardless of what does or doesn't make sense.  Set the minimum wage once so that the increase is comparable to one of the states that already has a decent minimum wage, and then peg it to some kind of index.  Then there will be no more arguing, and no more straw man attacks to put up with.  From that point forward, it would simply be up to states, and local governments to decide whether to set a wage that exceeds the federal minimum.  Some will say that the feds don't have the constitutional authority.  Right; and they don't have the authority to pass many other laws either, but they still do it don't they?  It is really up to the people to decide whether they care about keeping government in check.  For now, the republicans and libertarians need to worry about fighting more winnable battles.  By the way, the title of this article is preposterous.  Nobody ever said that a minimum wage increase would mean death to businesses.  They simply stated that it would result in less hiring, which still might be true.  If it turns out to be disastrous, then republicans and libertarians could simply say look we were right!  We only voted for it as a compromise because we were not in charge at the time.   I don't see any downside for repubs/libertarians to support the increase provided that there are common sense exceptions so that I'm not paying a kid $10 an hour to shovel the snow on my sidewalk.

JLDodd
JLDodd subscriber

Some years back California Democrats were insisting we raise the minimum wage while they were also insisting that the condition being rich began at an annual salary of $36,000 (they wanted to tax that more you see). I asked a leading Dem why we could not raise the minimum wage to $18 an hour, then we would all be rich?


jim dodd

Janet Shelton
Janet Shelton subscriber

I own a business in Oregon, where the minimum wage is $9.10.  I can tell you for a fact that this has not affected the number of employees we have or the hours they work.  That's because it would be shooting myself in the foot to reduce either and lose income as a result.  Increased minimum wages has caused prices to rise a little because it has caused all wages to go up.  Yet, over the same period of time, I've seen larger percentage increases in the cost of goods, rent and utilities.  None of my employees make minimum wage except the occasional temp.  Because I pay well and provide good working conditions, I have had all my staff for 3 to 12 years.  Lower turnover is well worth the cost.

don lindsay
don lindsay subscriber

This guy is just simply wrong. This minimum wage ploy has long been a tactic by leftists to appeal to the sense of victimhood of their liberal, chronically unemployed base. And the tidal wave of illegal alien minimum wage job thieves. They facilitate illegal immigration and support them once they get here. Then they seek to punish the successful (the rich) by redistributing their profits. (income 'inequality') Studies by Forbes, the Cato Institute, the Heritage Institute, and none other than the bipartisan Congressional Budget Office refute the claims made here and the skewed Gallup figures shown here. Minimum wage hikes cost jobs. Period. Proven over and over. It's the same kind of leftist insanity employed by nancy pelosi that the best way to improve the economy is longer unemployment benefits.
The push for minimum wage increases at this particular moment is a crass attempt to distract attention from the increasingly disastrous news for obamacare. Obamacare has been costing jobs and hours and incomes and peoples' affordable health coverage since day one.
This recent article explains more...

http://hotair.com/archives/2013/02/14/minimum-wage-hike-the-wrong-way-to-lift-working-poor/

James Weber
James Weber subscriber

@-P  So as workers become more expensive, businesses will hire more workers?   Who knew?

-P
-P subscriber

@James Weber @-P  One explanation as to why this happened is that most people who make minimum wage tend to spend all of their pay check to simply to put food on the table - a new pair of jeans is a luxury. If they make more money, they will have more to spend, creating more business for the neighborhood stores. To keep up with the increased business, the small businesses would need to hire more people, or those customers will go somewhere else. In San Jose, a large number of those newly created jobs were/are minimum wage jobs, I'm guessing that means an increase in retail jobs, which would fit into the scenario I just described. If you've got a different explanation for the San Jose/San Francisco/ D.C. numbers, I would love to hear it.

-P
-P subscriber

@Jim Jones @JLDodd  You might be on to something Jim. Between 1974 and 2011 average incomes for the top 1% rose 194%. Had federal minimum wage risen at the same rate, it would now be $26.96.

James Weber
James Weber subscriber

@Jim Jones @JLDodd  We should set the standard for the nation by making the minimum wage $50/hour.  Social justice now!

-P
-P subscriber

@Jim Jones @-P @James Weber  Thanks Jim. Following your argument, then the reverse claim, that raising minimum wage results in higher unemployment, is also unsustainable. There's either a link from minimum wage to unemployment rates, or there's not.