There’s been a lot of talk lately about the minimum wage, and I heard this morning that the President intends to increase minimum wage for some workers, by way of executive order, by almost 40% (later announced during the State of the Union Address). Although this particular action does not affect us or our employees, I’ll admit I’ve been stewing about this for most of the day. This isn’t a left or right issue; this is straight economics. I don’t know enough about law to discuss that aspect of this decision, but I do have experience with work and minimum wage, from both the worker’s and the employer’s side of the coin.
As an employee
My first job other than babysitting was with the local park district at a miniature golf course. At the time minimum wage was $5.25/hr, and that’s what I earned. My manager typically staffed 2 workers during the day and 3 workers for busier nights and weekends. In my second year at the same job, I was anticipating a raise to $5.50/hr. Instead, minimum wage in the state was raised to $6.50/hr, so that’s what I earned.
Now you’re probably thinking that I was thrilled about this – an 18% raise is huge! Here’s the thing, though – that’s not really how it works. The park district labor budget didn’t change just because wages increased. My manager had to make a tough choice – cut costs or raise prices. He chose not to raise prices. As a result, my manager could only afford to staff the course with 2 people the majority of the time, and often only 1 person during slow times. I was making more each hour, but I was also working fewer hours, so my income didn’t really increase much. Additionally, customer service no doubt suffered at times as a result of understaffing.
My manager could also no longer afford to offer raises. Now, instead of earning more than minimum as a reward for my experience and hard work, I was still being paid the minimum. I was making the same amount as a person who was just starting her first job, like I had the year before, when I started my first job. As an employee, I wanted to be rewarded for my success and earn my raise.
As an employer
Ten years later, I now own a business, and I have to consider the same factors that my manager with the park district had to consider when hiring and scheduling employees. Our farm currently has two part time employees, both high school students. We pay slightly more than minimum wage, and would like to be able to offer them raises for improving their skills or efficiency or for taking on more responsibility.
I’ve run the numbers, and I know that to add a third employee with our current herd size, wages and milk prices, we need every cow to produce an additional 1.5 lbs of milk every day to pay for it. Without running the numbers, I can tell you that if the wages we pay are increased by 40% without being offset by an increase in production or the pay price for our milk, we would have to cut hours for our current employees. We don’t have our employees standing around doing nothing, and that work still has to be done, so it puts us in a tough spot. But the fact is, we can’t spend money we don’t have.
Do I need to say that again? We can’t spend money we don’t have.
Based on my experience, raising the minimum wage does not help workers. It turns good jobs into minimum wage jobs, and it prevents job growth. The higher the cost of labor, the less likely we will be able to afford to create a job. The higher the starting wage we pay, the harder it is to offer raises or incentives to our more experienced employees.
As an employer, if our employees become more valuable, so does our business. I want to have a reason to pay our workers more than minimum wage, but I do not want that reason to be a law.