Welcome to DU! The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards. Join the community: Create a free account Support DU (and get rid of ads!): Become a Star Member Latest Breaking News General Discussion The DU Lounge All Forums Issue Forums Culture Forums Alliance Forums Region Forums Support Forums Help & Search

HughBeaumont

(24,461 posts)
Thu Feb 27, 2014, 10:20 AM Feb 2014

OK, Explain This To me Like I'm a Complete Idiot, Part 13: Small Businesses and Min. Wage Increase.

So on FB today, random small business owner was griping that, in regards to his business:

a) labor costs are running 38-40%
b) a minimum wage increase translates to an across-the-board increase for ALL employees
c) barely get by, work 60-80 hrs a week, blah blah blah (because your average working stiff, of course, doesn't even come close to that Not belittling him, but don't make this a dick-swinging contest).
d) a 20% increase in payroll would mean he would have to increase prices 20%
e) mega-corps can handle the wage increase, small businesses can't.
f) 12 people would be out of work and he'd have to close down.

Now, while this is a concern, here are my questions:

Is this situation the fault of the government for trying to make things an atom speck fairer for severely underpaid workers or is this situation the fault of said short-term/short-sighted small businessperson for being under the mistaken notion that the ridiculously low 7.25 an hour insult would remain in place for eternity? Is the small business owner under the notion that workers in 2014 are paid too much? Fact after chart after graph after study proves that idea dead freaking wrong, and if you have workers with no disposable income, there will be no DEMAND. That's not "Economics 101", that's Common Freaking Sense.

I mean, no one wants an entrepreneur to feel pain or close down. That's not what the intent of this discussion is about. I just have to understand why these people thought that they could get away with paying people a pittance forever . . . and it IS a pittance. With studies showing that 40% of workers now making LESS than the inflation-adjusted minimum wage of 1968, it borders on idiotic to think that a proper inflation correction (which used to be sound economics and sound capitalism but is now apparently "SOSHULTITS" in 2014) is "asking too much".

Is it that they just want every other company besides theirs to get demand going by increasing worker's wages? Or should it be phased in gradually for small businesses, right away for large ones? Is that a fair plan or is there more to it than that?

11 replies = new reply since forum marked as read
Highlight: NoneDon't highlight anything 5 newestHighlight 5 most recent replies
OK, Explain This To me Like I'm a Complete Idiot, Part 13: Small Businesses and Min. Wage Increase. (Original Post) HughBeaumont Feb 2014 OP
I have to say gollygee Feb 2014 #1
Simple Arithmetic Is The Beginning Of Wisdom, Sir The Magistrate Feb 2014 #2
This is why I had to ask people who have been there . . . HughBeaumont Feb 2014 #3
That's what I saw too. Springslips Feb 2014 #9
Seriously, were they planning on paying employees minimum wage with no raise for JaneyVee Feb 2014 #4
He pays them 8.50-10 an hour. HughBeaumont Feb 2014 #5
You assume he has a successful business hack89 Feb 2014 #7
As a small business owner, here are my answers taught_me_patience Feb 2014 #6
20% increase in payroll does not mean you have to increase prices. Rex Feb 2014 #8
people that decide to start their own business and then complain about the amount of hours they work frylock Feb 2014 #10
The entire system is forcing many to do just that. nt Demo_Chris Feb 2014 #11

gollygee

(22,336 posts)
1. I have to say
Thu Feb 27, 2014, 10:25 AM
Feb 2014

that I don't personally think there's any situation at all where people should be hungry or not be able to afford medical care or suffer any of the other problems of life in poverty for the profit of any business owner at all of any business of any size.

If a minimum wage increase so horribly affects small businesses, then we need to structure things differently so it does not. Maybe stop subsidizing large businesses so much that small ones can't compete. But we don't solve their problem by allowing them to pay their employees so little that the employees remain in poverty even working full time.

The Magistrate

(95,248 posts)
2. Simple Arithmetic Is The Beginning Of Wisdom, Sir
Thu Feb 27, 2014, 10:26 AM
Feb 2014

If his labor costs are forty percent of his overhead, a twenty percent increase in labor costs increases his overhead by eight percent, not twenty percent....

HughBeaumont

(24,461 posts)
3. This is why I had to ask people who have been there . . .
Thu Feb 27, 2014, 10:32 AM
Feb 2014

. . . kind of needed to know whether his numbers that he cites are realistic and reasonable, and not just more wingding justification for cheap labor conservativism. My guess is that the "20% increase in prices" seems a little fishy.

 

JaneyVee

(19,877 posts)
4. Seriously, were they planning on paying employees minimum wage with no raise for
Thu Feb 27, 2014, 10:32 AM
Feb 2014

Eternity? A biz owner should factor in raises for employees.

HughBeaumont

(24,461 posts)
5. He pays them 8.50-10 an hour.
Thu Feb 27, 2014, 10:37 AM
Feb 2014

Still, I'm not getting why he didn't think to plan for raises. That's as inevitable as time and tide, sorry to inform him. Well, unless you WANT no customers.

hack89

(39,171 posts)
7. You assume he has a successful business
Thu Feb 27, 2014, 10:45 AM
Feb 2014

with the necessary growth to pay for raises.

50% of small business start ups are out of business by 5 years, aprox 70% by ten years

http://smallbiztrends.com/2012/12/start-up-failure-rates-the-definitive-numbers.html

For most small business owners, mere survival is the only thing on their minds.

He should be paying higher wages. It doesn't mean he can afford to.

 

taught_me_patience

(5,477 posts)
6. As a small business owner, here are my answers
Thu Feb 27, 2014, 10:38 AM
Feb 2014

a) labor costs are running 38-40%
<this is very typical for a restaurant type business. Obviously in manufacturing or retail business, labor would be much lower.

b) a minimum wage increase translates to an across-the-board increase for ALL employees
<mostly true. Salaried employees (managers) probably wouldn't get a pay increase. But the guy making $9/hr is suddenly going to want to make $10/hr.

c) barely get by, work 60-80 hrs a week, blah blah blah (because your average working stiff, of course, doesn't even come close to that Not belittling him, but don't make this a dick-swinging contest).
<probably true to some degree. The first couple of years in small biz is HELL.

d) a 20% increase in payroll would mean he would have to increase prices 20%
<totally false. He'll have to raise prices 8% to cover the additional cost.

e) mega-corps can handle the wage increase, small businesses can't.
<there are many small businesses that can handle it. But, in general, larger business are better equipped to deal with it.

f) 12 people would be out of work and he'd have to close down.
<probably how he feels right now. may or may not be true. An increase in minimum wage will be extremely painful to a lot of restaurant owners who are just struggling by right now.

Full disclosure:
I own a coffee shop where most employees make $9-10/hr + tips.

 

Rex

(65,616 posts)
8. 20% increase in payroll does not mean you have to increase prices.
Thu Feb 27, 2014, 10:48 AM
Feb 2014

Small business owners took advantage of decades of 'Piss on the Working Class' economics. Now they need to get use to a more competitive market. IF they don't want to pay minimum wage, then good luck staying in business - IE employees will find the job that DOES pay 10 plus an hour.

I've worked for many small business and own my own small business. When an owner complains about wages, what they really should be complaining about is getting the cold shoulder on the trillions in corporate welfare the Big Biz fellas wallow in daily.

Instead they would more likely blame a poor person on social welfare than their much richer cousins on corporate welfare - for the state of the economy.

frylock

(34,825 posts)
10. people that decide to start their own business and then complain about the amount of hours they work
Thu Feb 27, 2014, 03:40 PM
Feb 2014

should really just STFU. nobody forced them into this. nobody.

Latest Discussions»General Discussion»OK, Explain This To me Li...