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)

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, an increase in minimum wage would only mean the tiniest of increases to consumer prices. As explained by demos:

“The potential cost to consumers would be just cents more per shopping trip on average.    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. Small business owners also stand to benefit in several ways from a serious wage hike for their lowest paid workers.

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

1-- A higher minimum wage will not hurt job growth.  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,  economists agreed, 4 to 1, that the benefits of increasing the minimum wage substantially outweigh the cost. 

2--  A higher minimum wage is good for local business.   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-- Higher wages means less turnover (and less turnover cost) 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 turnover rates “fall substantially” after a minimum wage increase.

4--Higher wages may lead to higher levels of trust between employees and employer. 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 for every $1 retail employee wages are raised,  the company saves an average of some 40 cents in lost merchandise. Conversely, researchers have found that decreased wages has a strong connection to increased employee theft.

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, : “While productivity grew 80% between 1979 and 2009, the hourly wage of the median worker grew by only 10.1%, with all of this wage growth occurring from 1996 to 2002.” Meanwhile, the cost of living in America has risen by 67% since 1990 alone (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 out of all “developed nations,” America has the greatest levels of income inequality. Point blank: American businesses owe their workers for nearly two generations of increased profits during stagnated wages.

--Manny Jalonschi--