Let’s imagine that you are the proud owner of a business that sells quick take-out meals, all for $5 or less.
You’re located close to the high school and on a main drag, with pull-outs for large vehicles. Local teens and truckers especially like your menu and, since you’re open at 4 a.m. to midnight six days a week, your hours make it convenient for them when not many others are open – on the way to the mountains, for lunch, or after a late game at the high school.
You’ve found a niche because, down the street at the chain fast-food joint, hamburgers are $5 and a meal is $7.50 (with a drink and fries).
You’re staying afloat, but due to those hours and the fact that you’re not super-human, you have to hire help. You’ve found some reliable individuals who are willing to work for $9.25 an hour. Yes, they might make a little more down the road in Lebanon or Albany, but after they’ve done the math and factored in other circumstances, they’re happy to work for you.
Things are going as well as could be expected in a demanding fast-food business. No one has found a fishhook in their food.
Now comes Gov. Kate Brown and the Oregon Legislature with a new twist (in addition to the new state requirement they passed that each full-time employee get 40 hours of sick time per year).
This means you’re going to have to pay each of your employees a dollar more per hour by the beginning of next year and within five years (2022) they’ll be making $13.50 hourly.
What does that do to your $5 menu?
Right. You’d have to raise your prices to $6 by Jan. 1 to stay afloat in a business with relatively low profit margins, and that means you may lose some market share (customers) unless you’re fortunate and (we say this with tongue in cheek) inflation outpaces what’s about to happen to you, forcing the general public to get used to paying more for the goodies they enjoy.
We support the Linn County Commissioners’ stand, reported on page 1, against this political ploy by the governor and the legislature which, perhaps not shockingly, comes smack-dab in the middle of an election year.
The biggest problem here is that our governor and legislators, who apparently aren’t strong in business experience and economics savvy, are deciding how much you should pay your employees.
This isn’t the first time we’ve weighed in on the attempts around the nation to hike minimum wages. We’ve spoken against it because it’s bad policy, even though it might temporarily aid some needy people.
Now it’s here.
It is economic folly to blandly assume that simply boosting people’s pay will result in a better life for them, because there are inevitable consequences due to the costs involved. We don’t have to be geniuses to recognize that employers are working with a fixed amount of revenue when they decide how much they can afford to pay their workers.
Ed Whitelaw, a founder of the economics consulting firm ECONorthwest, was quoted in a report in the Jan. 31 Eugene Register-Guard as noting the lack of thorough analysis of how raising the minimum would affect businesses and the state. Without that, it’s simply anybody’s guess.
“Those who favor it say it will lift Oregonians out of the unconscionably low incomes they’ve earned for several decades,” Whitelaw was quoted as stating.
“The other side says that all it’s going to do is increase the cost of labor for businesses, who will lay off workers, and it’s a zero sum game. But, actually, it’s an empirical question that one cannot answer without rolling up our sleeves and asking policy questions and doing the numbers. Neither side has done that in a very specific data-driven context of Oregon’s economy and its workers and industries.”
We recognize that this isn’t occurring in a vacuum.
Poverty is a real problem in Oregon and, granted, some greedy employers do take advantage of hapless workers – as they have for millenia. Many of us can recall working for skinflint bosses who didn’t pay us what workers down the road, whose job descriptions matched ours, were getting. But the correct answer to that is to strike or to move to a better situation. If that employer wants to deal with that cost – turnover and resulting stress at the management level, too bad.
We don’t like to see people get underpaid. But government intervention isn’t the answer – especially when the homework hasn’t even been done.
It’s true that employers treating their employees with dignity and generosity is almost assuredly a win-win.
A forwardprogressives.com article favoring a legislated minimum-wage hike tells of Punch Pizza, a Minneapolis, Minn.-area chain whose owners decided to pay more, despite the doubts of naysayers.
“We just weren’t getting the quality of applicant before,” said John Puckett, one of the Punch Pizza owners. “Now we have a lot more applications that we don’t have jobs for. If you pay people more, I think you can demand more. When we did this, we got everybody together and said, ‘We need to blow people away with our service.’
“Our retention is light years ahead of most restaurants.”
We agree with that principle, if not the means the website is promoting.
Another example, In-N-Out Burger, is a popular fast-food chain south of the border, which is slowly moving into Oregon – a restaurant has opened in Medford and another is planned for Grants Pass.
In-N-Out starts all its employees at $10.50 an hour and front-line employees can make up to $14 an hour. Managers’ pay can go into six figures. In California, where the majority of the firm’s restaurants are located, the minimum wage is $10 an hour – after an 11.1 percent hike (from $9) as of Jan. 1, established by the state Assembly.
It’s common knowledge that In-N-Out employees stay longer and they’re happier. They’re well-trained in front-line skills that make you feel welcome and appreciated. That’s why they’re crowded.
In bygone years, a former associate at The New Era was known to drive to Redding, Calif. on a whim, simply to indulge in the fare and service at In-N-Out.
So why not just make this law?
Here’s why: Morality needs to rise from the heart.
Forcing people to do the right thing can only go so far, and usually results in backlash.
Unions are a result of excessive and evil greed on the part of employers, which manifested itself in cruel abuse of workers. But many problems now associated with unions stem from greed on the part of the beneficiaries. The solution has backfired, in some cases.
We can only go so far in legislating morality, ideally no further than maintaining public safety.
When government extends itself further into public wellbeing, the public will ultimately pay – in taxes or, in this case, increased prices.
Boosting the minimum wage may benefit some, at least temporarily, but we’ll all lose in the end.
This is going too far – unless legislators in Salem are ready to start doing lunch in Sweet Home.