How to destroy 6 million jobs in one easy step.
The complete CONFESSION of a FAST FOOD business owner, and the realities of minimum wage employment!
The debate surrounding the argument to raise the minimum wage to $15 an hour has been raging for over a year now, and at this point I am utterly sick of it.
The flames are being fanned by pandering, know nothing presidential candidates flapping their jaw bones,
All in the hopes of greasing the vote pump in their favour, and a mass media hell bent on collectivising the USA.
Yes I am talking to you HILARY CLINTONIUS and BERNIE SANDERNISTA, both of whom have never worked a day in their lives!
This whole debacle has been NAUSIATING in the extreme to those of us who care about the FACTS of life, and economic reality.
BUT;
Perhaps the most excruciating part of this 'envy movement' has been listening to people scream at the top of their lungs about how 'UNFAIR' things are, and how their efforts are 'WORTH MORE'.
At the same time, not one of them have ever RISKED a damn thing in their whole lives to make something of themselves!
I have taken this whole thing very personally, to be sure.
Because I, unlike these snivelling babies, have actually been in the position of having to write those paychecks.
It did not matter if business was bad that week.
Or if there was a penny left in the pot to pay myself.
These facts of life mean nothing to the employee who has faffed about all evening and maybe packed a few shelves or flipped a few burgers, not have to spare a thought for the viability of that business, are there enough sales happening, can we really afford to buy that advertising run, can we afford not to?
And that is fair enough, these life and death problems are not the realm of the low wage worker, but that is precisely why there are low wage jobs, they do not require thought!
I have BEEN THERE on the fast food business front line.
And in this article I want to clear away the haze and tell those workers about the realities of business, and what this ENORMOUS rise in a business' wage bill will do to the hourly wage economy at large.
And ultimately, I want to show people what will happen to the jobs they hate so much, If this extortionate wage increase happens!
But first, a little back story on my experience, so the employee and I can compare notes!
I have worked in many different industries so far in my life.
But,
Two years ago, My brother and I built up from scratch and ran our own pizzeria in our local town, we ran it for over a year before selling up, after it damn near killed both of us!
Here are some of the highlights of that time in my life. See if you can relate to any of this!
- I have gone six whole months without taking a penny home for myself.
- I have worked until 2 or 3am and routinely did 16 hour days, without any pay.
- I have sat there waiting for the phone to ring praying 'please let somebody buy something' so that we could pay the rent the next day.
- I have walked endless miles pushing flyers into letter boxes in the cold winter rain without any reward.
- We used to turn on the oven for a few minutes to warm up the kitchen, It was so cold because we couldn't afford to keep the oven on all the time at the start!
- I have waited all night and not received any orders, but I still had to get up the next day and buy new stock and pay more bills.
- It took six months before we could pay ourselves something from that business, and that was a huge 50 a week each!
- I have had to bend over backwards for employees to keep them happy while I was dying slowly inside. - I had a sitting blood pressure of 160/90 at this time.
- I can feel my blood pressure rising as I write this!
- I have had employees go out on a delivery and lose the damn money they were supposed to bring back! And I still had to pay the guy at the end of the night!
- I have had employees storm out and complain about having 'never been treated so bad in their lives', leaving us completely in the lurch. I still haven't figured out what that guy's problem was!
- I have had employees take money from petty cash to put gas in their car! and then tell me later like it was perfectly kosher. Apparently when you take from your employer, its not stealing!
- Then there was the disappearing employee's, not turning up for a whole week, without contacting me, and then reappearing like nothing happened! What the hell?
- I have had to deal with suppliers jacking up our prices on a whim, while being unable to change our menu prices for months after, so we just had to absorb the cost and go without!
This list could go on for ever and ever, but I will burst a blood vessel if I do!
You might ask what the point to all this ranting is ?
Firstly, its therapeutic, and that alone is a good enough reason for me!
But the real reason is this:
People have to realize that a business lives within economic constraints that do not shift quickly.
In fact, they shift incredibly slowly for most small business'. If a normal restaurant increased it's sales by 3% year on year, that would be an impressive result.
The fact of the matter is,
- You cannot jack up the minimum wage and therefore, the cost of doing business, by a whopping 18% and expect business to be able to stay operating.
- You cannot increase the cost of low skill labor by a whopping 47% and expect those jobs to still exist!
It JUST WON'T HAPPEN.
Frankly, If you believe this can happen, then your out of your mind!
Here's the reality, if you are fit to hear it.
Packing shelves or flipping burgers is not a career and was never meant to be!
These are entry level jobs that exist so that people can learn the skills needed to prosper in the working environment. These jobs are not meant to support a family for life!
Here's what happens to a small business when you increase costs by that magnitude.
An average small business has a cost structure that goes something like this.
- General expenses such as rent, heat, light, insurance, inventory, maintenance, professional services ect ect ect ect.... these amount to about 55% of overall revenue.
- Employee wages amount to about 40% on average.
- And the Boss get's a whole 5% before tax, that is if there is even anything left in the pot!
You then have to account for life happening!
Your van breaks down and needs a new engine, or a machine breaks down and has to be replaced ,
Or any number of other silly crap that happens in every day business, and there goes the owners reward, right down the drain!
This is the reality, I know because I've been there!
Being a business owner is a bit like being a parent, in that you put endless hours of effort and devotion into something that you hope will take care of you when your old and retired!
The next step in this lesson in reasoning and reality is to take the example of my small business and apply it to the economy at large.
In 2015 78.2 million people in the U.S worked in low skill hourly wage jobs (as opposed to salaried jobs).
These are jobs like stacking shelves or loading trucks or flipping burgers
Of those 78.2 million people, 25% of them or 19.5 million people worked for up to $10.20 per hour. This is the wage level at the 25th percentile.
A $15 minimum wage would constitute a 47% pay rise for that 25th percentile wage!
Want to know what effect that 'pay rise' has on a small business?
Well here's what happens:
It turns that 40% wage bill into a 58% wage bill!
And hey presto your out of business!
Your minimum wage just got reset to $0..............................how does that feel?
Imagine that scenario replayed over and over across the country, to hundreds of thousands of business'. This will not be a pretty sight.
So, how many workers will lose their jobs?
You can't know for certain until after the fact, but we can use a little known technique called MATH to make an educated guess.
Take those 19.5 million workers.
All these people work for business', like my pizzeria, which operates with a ceiling on the percentage of revenue they can afford to spend on wages. This ceiling is about 40% of revenue.
The ceiling cannot be raised to accommodate a huge pay rise for workers, the revenue simply does not exist!
So, if $10.20 per hour can employ 19.5 million people, how many people will be employed at $15 per hour?
First you calculate the ratio between the two pay rates: 15/ 10.2 =1.4706
Then you divide the original amount of workers by that ratio: 19.5 / 1.4706 = 13.294 million people.
That minimum wage increase just reduced the numbers employed in low skilled labor by 6.256 million people
Hey presto, you have just destroyed 6 million jobs in one easy step.
If you don't believe me, just try it, and see what happens.
But;
Don't come knocking on my door looking for a job when your employer has to shutter his shop.
All data used in this article was sourced from:
https://research.stlouisfed.org/fred2/
And my own database of personal experience!