It is all about the Jobs
Every business owner is faced with doing business the right way while also trying to make a profit. For a small business owner this statement could not hit closer to home. As a Chamber executive, working alongside these businesses, it is amazing to see how many forgo salaries in order to ensure they are able to support their staff and business. Putting in tireless hours and pouring all of themselves into a business is exhausting but many say tremendously rewarding. Today businesses across the county of Los Angeles face one of the single largest challenges they have to date. The minimum wage increase being proposed by County Supervisor Keuhl may very well prove the death knell for many business owners.
One of the first arguments being made in regards to increasing the minimum wage is that it will bring a large group out of poverty. While statistically speaking, based on today’s salary info, it may be accurate but to say this is disingenuous at best. With the individual poverty line in Los Angeles County set at just below $12,000, according to the US Department of Labor, it is hard to imagine anyone earning $15/hour not exceeding this amount. After all at $15/hour they would need to work about 15 hours a week to reach such a threshold. What is not discussed is that by raising minimum wage this threshold will also be raised.
Inflation is the least spoken about topic when it comes to minimum wage. If the cost of providing services or creating products were to increase the logical next step would be an increase in the cost of goods sold. There is not one company who could afford to absorb a 66% increase in labor costs without passing that on to the consumer in some fashion. There is this utopian belief out there if we raise a person’s salary who works in a fast food establishment to $15/hour suddenly they will be able to afford the products they are serving. Again in theory this makes sense if retail costs were to remain the same, but how could they? If a burger is sold for $5 today and the company is working on a 10% profit margin, that would mean they earned roughly .50 cents on that transaction. Being conservative assume labor is 20% of the cost for that transaction it would account for $1 of the transaction today. Factoring in a 66% increase in the labor cost if the company did not pass on the cost they would lose .16 cents a transaction. A more realistic scenario is one in which the company raises the retail price of the burger by .66 cents, just to maintain the 10% profit margin they have.
The other argument is that somehow minimum wage was or is designed to be a living wage. This was never the case. When established in 1938 by President Roosevelt it was designed to combat oppressive child labor. Minimum wage in essence is to protect an individual from being overworked and under paid for their services, not to generate a living off of. All of the business owners we work with agree they want to see their employees compensated fairly and in many cases they pay more than minimum wage to their entire staff. Minimum wage jobs are traditionally entry level positions allowing someone to garner experience to either move up or onto a new better paying job. Increasing this wage by 66% will force many companies to eliminate a number of these jobs or reduce the hours they are eligible to work. In both scenarios either an individual will not be able to gain the experience needed for a better paying job or have a longer road to get there.
The Manhattan Beach Chamber of Commerce remains committed to driving a strong local economy and quality of life for the community. That is why we urge you to attend our next Economic Development Committee on Wednesday June 24th at 4 PM here at the Chamber. As a business community we need to ensure we are all educated about the decisions being made by our representatives.