5 Reasons Small Biz Owners Should Support a Living Wage

On August 29th, thousands of fast food workers around the country demanded fair wages and the chance to organize a union. Shown above, a contingent of fast food workers, labor allies and clergy rallied in Union Square as part of the Fight for 15. (Photo: M. Jalonschi/BQ Brew)

On August 29th, thousands of fast food workers around the country demanded fair wages and the chance to organize a union. Shown above, a contingent of fast food workers, labor allies and clergy rallied in Union Square as part of the Fight for 15. (Photo: M. Jalonschi/BQ Brew)

Fast food workers around the country are making headlines in their fight for a union and a living wage. While the target of the Fight For 15 movement are the fast food chains, local activists also follow on the heels of other low-wage worker uprisings throughout New York City. As communities, perhaps its time we started really thinking about the moral meaning of a wage that pays a full-time worker too little to reach the poverty line. If the minimum wage had kept up with inflation over the last forty years, it would be $10.74 an hour (it’s currently $7.25).

Counter to the panic-stirring by right-wingers and the shadiest of corporations attempting to keep wages below the poverty line, [tweetable]an increase in minimum wage would only mean the tiniest of increases to consumer prices.[/tweetable] As explained by demos:

[tweetable]“The potential cost to consumers would be just cents more per shopping trip on average.  [/tweetable] If retail firms were to pass the entire cost on to consumers instead of paying for it by redirecting unproductive profits, shoppers would see prices increase by only 1 percent. “ (source)

But it’s not only employees in the low-wage professions who stand to win from significant increases in the minimum wage. [tweetable]Small business owners also stand to benefit in several ways from a serious wage hike for their lowest paid workers.[/tweetable]

Here are 5 reasons small business owners should support a significantly higher minimum wage for their workers:

1– [tweetable]A higher minimum wage will not hurt job growth.[/tweetable] Economic studies have shown that, contrary to the stream of right-wing talking points coming out of the right-wingers in corporate America, a higher minimum wage does not hurt job growth. In a survey of the past 20 years of research, economists found little or no effect on job growth. Furthermore in a 2013 survey,  [tweetable]economists agreed, 4 to 1, that the benefits of increasing the minimum wage substantially outweigh the cost. [/tweetable]

2–  [tweetable]A higher minimum wage is good for local business. [/tweetable] States that have a minimum wage higher than the federally mandated minimum actually have significantly higher small business and retail growth. From a strictly capitalist perspective, shoppers have to have enough money (for most of us, that means from a job) to keep shopping.

3– [tweetable]Higher wages means less turnover (and less turnover cost). [/tweetable] As small business owners know all too well, the cost of replacing an employee can involve a lot more than just the wages they’re eventually paid, In fact, a 2012 study by the Center for American Progress found that ” it costs businesses about one-fifth of a worker’s salary to replace that worker.”

When researchers at the Harvard Business School examined Costco’s business model (the average wage at the store is $17/hour), they found that for Costco “[employee] turnover is unusually low, at 17% overall and just 6% after one year’s employment. In contrast, turnover at Wal-Mart is 44% a year, close to the industry average.“

In 2003, San Francisco airport raised wages from $6.45 to $10 an hour–and saw a dramatic drop in turnover from 95% to 19%. Similarly, “a study of home-care workers in San Francisco found that turnover fell by 57% following implementation of a living wage policy.” (source). A study released in July of this year by Dube, Lester and Reich examined the impact a higher minimum wage had on employment rolls and found that [tweetable]turnover rates “fall substantially” after a minimum wage increase.[/tweetable]

4–[tweetable]Higher wages may lead to higher levels of trust between employees and employer.[/tweetable] It’s always kind of a strange moment when a company that constantly rips off its employees fires an employee for ripping the company off. Nonetheless, the National Retail Security Survey found that over $15 billion in merchandise was lost nationwide to employee theft in 2011.

A research team at the Harvard Business School wanted to explore the relationship between higher wages and employee theft. It turns out researchers found a strong connection between higher wages and a significant decrease in employee theft. Savings on otherwise lost inventory amounted to around 39% of pay increases. That is to say research shows that [tweetable] for every $1 retail employee wages are raised,  the company saves an average of some 40 cents in lost merchandise. [/tweetable] Conversely, [tweetable]researchers have found that decreased wages has a strong connection to increased employee theft.[/tweetable]

5– It’s the right thing to do. American businesses have been squeezing much higher productivity from working folks at stagnating wages. Put most succinctly by EPI, : “[tweetable]While productivity grew 80% between 1979 and 2009, the hourly wage of the median worker grew by only 10.1%, [/tweetable] with all of this wage growth occurring from 1996 to 2002.” [tweetable]Meanwhile, the cost of living in America has risen by 67% since 1990 alone [/tweetable] (source).

Inequality in America has reached historic proportions (one study found that our level of inequality is even higher than the Roman Empire’s). A study published earlier this year in The Journal of Economic Perspectives found that [tweetable]out of all “developed nations,” America has the greatest levels of income inequality.[/tweetable] Point blank: [tweetable] American businesses owe their workers for nearly two generations of increased profits during stagnated wages.[/tweetable]

Manny Jalonschi