Minimum wage increase would cause issues for businesses

Published 10:45 am Saturday, February 15, 2020

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Remember that quote from President Barack Obama that claimed, “If you’ve got a business you didn’t build that?”
It appears Governor Northam and the Democrats in the Virginia General Assembly bought into his thinking. It appears they believe that your business is not yours, but rather the government’s. They believe that the investment you have made in both money and sweat equity does not qualify you to make the decisions needed for your employees and the continued success of your operation.
They believe government should set the standard of who should be hired and how you should deal with those employees. It makes absolutely no difference to them if your business is profitable or not. The only issue to them is their chance to be in the news media as being the hero of those who might be receiving the federal minimum wage rate (which is only 3% for those over 25). When I presented the data of how their proposal would affect one company, they simply couldn’t nor did they respond. That company operates in over a dozen locations. They tabulated how their business would be affected.
The proposed state mandated raise to $10 an hour the first year would cost that business $561,000. They currently start employees at the federal minimum wage and provide raises as they prove their value to the business. Raising the starting wage would require them to give comparable raises to all other employees. To address this greater cost of doing business will require them to eliminate 18-20 employees. Additionally, they will have to reduce health insurance and/or their retirement plan.
Another business with multiple locations calculated that the increase would exceed annual profits. They would have to discontinue business or increase prices accordingly. At the same time, Democrats are planning to raise the price of gasoline 11 cents a gallon this year and at least 8 more cents in the next couple of years. This will affect our folks worse than those in other areas. We have to drive farther to work and shop, taking a greater percentage of wages on gasoline and every other product they need to provide for their family. As everyone knows, it won’t be just gas that goes up.
We know from experience that raising minimums does two things. First, employers will be less likely to hire inexperienced employees. Those employees often have to be molded into being a value to the employer. With no known skills or value, employers will try to stretch the responsibilities of the existing employees. When we went to Seattle to visit my son, who was then stationed by the Navy there, many of the restaurants we went to used very few employees. Most waitresses and waiters were replaced by placing and picking up orders at the counter.
The other way of cutting payroll costs is by relying more on technology. More and more national chains are using automatic checkouts as customers complete their shopping. Likewise, restaurant chains are pushing you to place your order and pay for your meals by machines, again to reduce the number of employees needed.
Larger national chains are not overly concerned about rising minimum wages because, in most cases, they set the prices. Because of their volume buying power, big box stores operate on a greater profit margin. Therefore, they have the ability to raise prices where smaller local stores that operate on lesser profit margins cannot. Additionally, national chains have the capital needed to buy expensive automating equipment that local businesses do not.
The end result of this is that those small businesses that currently are operating on lower profit margins will be disproportionately harmed by state mandates. Those local owners will have to work longer hours and, therein, will face burnout. Their children, seeing their parents working longer and longer hours to survive, will be less likely to want to continue the business and seek work elsewhere. All this will lead to more businesses closing, leaving our communities without local businesses that are the heart and soul of every one of our communities. Instead of local restaurants, we will have more chain restaurants and stores that will be able to raise prices freely.
We will be in session until at least March 7. We would be honored for you to come to see the legislative process work. If you do, please come by our office at the Pocahontas Building room 505.
Frank Ruff Jr. represents Charlotte in the state Senate. His email address is