Increased unemployment vs raising minimum wage

[TexasHusker]

I am currently running a $50M business with about 50 employees below minimum wage. We manufacture high tech electro-optical equipment in MI. We don't pay them enough. Turnover is too high. Quality and efficiency are negatively affected.

So we are looking at how we retain these workers and the first answer is to pay them more. Then benefits. Then training. Then provide them with a path to move up. Then job satisfaction. We plan to do all of these things in the next year to be able to hire and retain good employees.

It will cost us some money and that comes out of profits. But wait, I save money by not having to hire new people all the time. My quality and productivity go up which saves more money. Their moral and job satisfaction goes up, which, theoretically, saves more money. I figure it pays for itself and then some.

I also plan to implement a bonus plan so that if the company does well, they do well. This is a no brainer. Get them vested in the success of the company.

That's how I see it. May not apply to the service industry, but it sure applies in manufacturing.

Tom

That is called "pay for performance", and is an entirely different deal than the gubmit raising minimum wage to $10 an hour or whatever arbitrary number it picks.

If the new minimum is $20 an hour that doesn't help your workers one bit, since a loaf of bread is now $10 and a gallon of milk is $15.

An arbitrary increase in the minimum wage causes all prices to rise to offset the increase, and it happens within a matter of months.

"Minimum wage" is just a political football used to win the votes of dumb people.

[corn18]

I'm curious to see how the bonus thing works out and how you plan to distribute it.

I remember from training that bonuses don't work well when given to everybody; it works better when concentrated on a few. And this was at a company known to give generous bonuses.

It's based on both company performance and individual performance. If the company hits the profit targets, that opens up the bonus kitty. There is no bonus for anyone if the company doesn't hit the plan. There is a minimum bonus pool for just hitting plan. As we exceed plan, the pool gets bigger. The amount each person gets is based on individual performance. If your individual performance rating does not meet standard, you get none. If it meets standard, you get a percentage of base salary. If you exceed standard, you get a bigger bonus.

[corn18]

That is called "pay for performance", and is an entirely different deal than the gubmit raising minimum wage to $10 an hour or whatever arbitrary number it picks.

If the new minimum is $20 an hour that doesn't help your workers one bit, since a loaf of bread is now $10 and a gallon of milk is $15.

An arbitrary increase in the minimum wage causes all prices to rise to offset the increase, and it happens within a matter of months.

"Minimum wage" is just a political football used to win the votes of dumb people.

Good point. If they raise the minimum wage to $15, I'll have to pay more to keep someone. At that point, I'll look at automation to replace bodies if the required pay gets too high. Spending $500k on automation to eliminate 3 heads that cost me $177k a year would pay for itself in less than 3 years. That's less then the capex period of 7 years so I start saving money immediately.

So, if you want me to cut 9 heads out of my company, raise the minimum wage to $15 an hour and force me to automate.

[disneysteve]

That only works under the lofty assumption that businesses do not raise prices on their goods/services or cut back on their labor force to afford the higher mandated wage.

If they raise the minimum wage to $15, I'll have to pay more to keep someone. At that point, I'll look at automation to replace bodies if the required pay gets too high. Spending $500k on automation to eliminate 3 heads that cost me $177k a year would pay for itself in less than 3 years.

And therein lies a big part of the problem with mandating higher wages. Employers find new and innovative ways to do more with less.

McDonald's is already testing self-serve kiosks for ordering and paying for your meal so that fewer cashiers are needed. Our local supermarket and Home Depot both have several self-checkout lanes. The upfront cost might be high but the long term savings can be substantial.

[pflyers85]

So you are in favor of massive government programs that support the underemployed? such as daycare assistance, SNAP, housing assistance, medical card, govt dental clinics, etc.

My point is raising the minimum wage is not going to eliminate or drastically reduce the size and scope of these programs. No government wage mandate is going to suspend the laws of supply and demand for human labor.

Do I believe that we as a society should turn our backs on the poor and destitute and kick them while they are down? Of course not. But I do not believe we should shackle businesses with a bunch of moral hazards. All this talk of "living wage" begins and ends in governmental/political circles. Since that is the case then the onus should be on them to solve their perceived problem rather than passing more unfunded mandates down to others.

[JBinKC]

To even start to tackle this issue on pay you have to eliminate our current debt based banking system crony capitalism and protectionism.

It might not sound fair but not all business models are consistent in the US. They have to be structured equally in our economy. I would heavily tax inflationary businesses and offer tax incentives and or tariffs for those in decline. For instance the way our health system is structured using insurance as a middleman you can always get away with rising prices all the time compared to those subject to deflation from foreign competition.

[TexasHusker]

And therein lies a big part of the problem with mandating higher wages. Employers find new and innovative ways to do more with less.

McDonald's is already testing self-serve kiosks for ordering and paying for your meal so that fewer cashiers are needed. Our local supermarket and Home Depot both have several self-checkout lanes. The upfront cost might be high but the long term savings can be substantial.

I own a service industry franchise and we are doing a lot of automating to reduce labor cost.

If we could reasonably count on labor to show up as scheduled, work as scheduled, and leave as scheduled, the automation wouldn't be as important.

The minimum wage crowd exists for a reason - they typically bounce from job to job. They work a few weeks, then start calling in, causing problems, complaining. We deal with this literally every day.

We start our folks out at $9 an hour, and still can't find good people. The ones that actually work don't stay at $9 an hour very long. We take good care of them.

[disneysteve]

If we could reasonably count on labor to show up as scheduled, work as scheduled, and leave as scheduled, the automation wouldn't be as important.

I hear this complaint a lot from business owners and managers that I know. Finding workers who actually want to work is a big challenge. I even know one guy who had to downsize his business because he could not find dependable employees.

When my wife was in management (retail), they had trouble even hiring people because the applicants either failed the drug test or failed the personality profile.

We hear so much about the unemployment rate but not nearly enough attention is given to all of the employers who are desperate for workers and simply can't fill open slots.

[TexasHusker]

I hear this complaint a lot from business owners and managers that I know. Finding workers who actually want to work is a big challenge. I even know one guy who had to downsize his business because he could not find dependable employees.

When my wife was in management (retail), they had trouble even hiring people because the applicants either failed the drug test or failed the personality profile.

We hear so much about the unemployment rate but not nearly enough attention is given to all of the employers who are desperate for workers and simply can't fill open slots.

We were planning on opening a fourth location, but we are having such difficulty finding people who want to work, we've backed off. In many cases, the minimum wage is far too generous for what the employee is willing to deliver.

[TexasHusker]

This idea that we can just improve low wage earners standard of living and purchasing power with the stroke of a pen is pure fantasy.

Isn't it crazy how few Americans understand that? It's sort of like saying "hey lets just put the printing presses in overdrive and mail every American $100K to pay off their debt." People can't seem to follow that logic to its disappointing end.

Gubmit signatures and arbitrary minimums don't raise anyone's standard of living. Hillary is just saying that to get votes, which happens every election cycle, and more successfully so in recent elections.

I call it the "dumbing down" of America.

[snafu]

While I don't have the reference at my fingertips, I recall reading a high percentage of jobs are never advertised, they are filled by referrals from current employees or referrals from people employer/HR trusts. That speaks to the need for job seekers to network and tell everyone they are seeking employment.

I've wondered what employees think of their immediate supervisor if their organization suffers from a lack of applicants. Anecdotally, when husband was an HR Manager of a large group, the figures from exit interviews confirmed extra ordinarily high percentages of employees took action to depart because of their direct supervisor. [DH's doctoral dissertation's topic was 'Job Satisfaction']

[TexasHusker]

While I don't have the reference at my fingertips, I recall reading a high percentage of jobs are never advertised, they are filled by referrals from current employees or referrals from people employer/HR trusts. That speaks to the need for job seekers to network and tell everyone they are seeking employment.

I've wondered what employees think of their immediate supervisor if their organization suffers from a lack of applicants. Anecdotally, when husband was an HR Manager of a large group, the figures from exit interviews confirmed extra ordinarily high percentages of employees took action to depart because of their direct supervisor. [DH's doctoral dissertation's topic was 'Job Satisfaction']

We actually advertise, but of all of the applicants who answer an ad, few are employable.

[TexasHusker]

This is our typical applicant, who needs her minimum raised to $15 an hour.

[disneysteve]

We were planning on opening a fourth location, but we are having such difficulty finding people who want to work, we've backed off.

This problem is not just confined to minimum wage workers either.

I work for a network of urgent care centers. There are currently 5 up and running. The 6th was supposed to open on July 18 but that date got pushed back and is now tentatively scheduled for September 12. Why the delay? They didn't have enough people to staff it. And I'm not just talking about $15/hour medical assistants. I'm talking about $120/hour physicians. I signed up for several shifts which ended up getting cancelled when the opening got postponed. Just yesterday I signed up for shifts again based on the new opening date. We'll see if that actually happens.

[TexasHusker]

This problem is not just confined to minimum wage workers either.

I work for a network of urgent care centers. There are currently 5 up and running. The 6th was supposed to open on July 18 but that date got pushed back and is now tentatively scheduled for September 12. Why the delay? They didn't have enough people to staff it. And I'm not just talking about $15/hour medical assistants. I'm talking about $120/hour physicians. I signed up for several shifts which ended up getting cancelled when the opening got postponed. Just yesterday I signed up for shifts again based on the new opening date. We'll see if that actually happens.

PCPs have been taking it in the shorts for years. They are at 90 to 110% of RBRVS, and RBRVS has actually been declining. Meanwhile, their specialist counterparts are knocking down at least 140% of RBRVS and in some cases, 300% RBRVS (neuro s, ortho, and ENTs)

The NPs and PAs are hurting the PCPs badly - hospitals are replacing PCPs with mid-levels. Next shoe to drop...RNs will begin giving primary care and writing prescriptions with a 4 week crash course. Mark it down.

As a side note, in my town of 200K, there are now 5 stand alone "ERs" within 5 miles of one another. 3 open and 2 more under construction. That ain't gonna fly.