Man in the Middle
So here’s the deal with one of my clients who is impacted by the minimum wage increase. First, the big story on the news was that not very many businesses in Utah would be impacted by the change. The argument was that most businesses were already paying most of their employees above the $7.25/hour rate. Valid point. Restaurant owners might beg to differ, however.
My client brings home an income in the low six-figure range from operating these restaurant locations. His earnings are well above the national average. But the lion’s share of his employees are either paid close to or at the minimum wage level. That happens to be the going rate in this market and economy. He’s competitive. So giving his newer employees who are making minimum wage an extra $0.70 per hour makes all of his more experienced employees clamor for a similar kick up in pay. “If Ernie’s value to this location is now 11% higher, than my worth certainly should go up,” is the likely thinking of the higher-paid employees. They’ve got a valid claim. As a result, they push the owner for more money as well. And to compete, he’s inclined to meet their request.
The flat-out reality for him is that, based on his 2008 profit and loss statement, his labor costs (not including increasing the pay of each store’s general manager) would increase by $55,000. Fifty-five K. That just blew his take-home below six figures. And since most of us live our lives by spending more when we get more, the whistling noise you just heard is his disposable spending power jettisoning downward.
Will he still make a good living from his restaurants? Yes, relative to his new employees. But determining what to cut out in his spending life to accommodate that $55,000 take-home decrease is like swallowing a doorknob. He has options, and we’ll go over them next time. However, none of them are palatable or realistic. So here’s one vote for the wage increase causing problems despite the ones it is trying to fix.
