Business
Another informative episode about the expected impact of a $15 per hour minimum wage in the State of Florida. In this episode, Charles Musgrove and guest Drew McLeod, restaurant owner, discuss the unintended consequences of what is likely to happen if this Amendment passes in Florida. Drew has spent over 40 years in the restaurant industry and has owned and managed several successful restaurants in and around the Tallahassee, Florida area. Drew talks about the financial challenges that already exist in the industry and the thin profit margins. The direct impact to his business will be immediate. The long-term impact will likely force the independent, full-service restaurants to change their business model or go out of business. The unintended consequences of this legislation will ripple through each business and the industry. Other pay grades will be impacted, workers' compensation insurance, payroll taxes as well as other employment costs will go up along with the minimum wage increase. Check out this episode to hear it from an owner in the business that will feel the impact.Small Business and the Fight for $15A new study shows how a rising minimum wage hurts little companies.By The Editorial BoardDec. 15, 2019 4:17 pm ETHere’s another volley in the debate over the “Fight for $15”: As the federal minimum wage rose from 1989-2013, small businesses in affected states suffered “lower bank credit, higher loan defaults, lower employment, a lower entry and a higher exit rate.”That’s according to a study last week from the National Bureau of Economic Research. The analysis by three professors at the Georgia Institute of Technology exploits the fact that many states—now more than half—set their own minimum wages higher than the federal standard. This provides a natural control group. When the nationwide minimum goes up, how do the states where it applies fare in comparison?Start with data on one million loans, averaging around $100,000, made through the Small Business Administration. For each $1 increase in the minimum wage, the authors estimate that loan amounts dropped 9% more in the affected states. The risk of default was 12% higher. The average credit score for small companies in those states showed “a sharp decline.” Business entries fell 4% in the year the minimum wage went up. A year later, business exits rose 5%.These results, the authors say, hold throughout various statistical analyses, such as while controlling for local economic conditions. The effects are stronger in businesses like restaurants and retail, which rely on low-skilled labor. Smaller and younger companies are more severely affected as well. In short, the authors conclude: “We find that increases in the federal minimum wage worsen the financial health of small businesses in the affected states.”By now some readers are probably thinking: Well, duh. It does not take a University of Chicago Ph.D. to suspect that raising the price of labor will make it harder to sustain a small, labor-intensive business. Don’t forget that there’s no cost-of-living adjustment: A $15-an-hour federal minimum wage would apply equally to a French bistro in Manhattan and a pizza joint outside Manhattan, Kan.Many progressives still insist this is a free lunch, and most of the Democratic presidential candidates support raising the federal minimum wage to $15. That includes the so-called moderates, like Amy Klobuchar and Mike Bloomberg. They ignore the millions of small businesses that are trying to make payroll and grow.The churn of companies with fewer than 10 employees, this study says, accounts for “more than 70% of job gains and losses in 2018.” No matter what politicians say, inhibiting that dynamism hurts the smallest businesses and the least-skilled workers the most. This is from a recent article about the subject.Seattle is experimenting with a $15 minimum wage — here are the results so farPublished Tue, Sep 17 20195:34 PM EDTUpdated Thu, Jan 16 20205:33 PM EST... Key takeaways, and what all this could mean for youThe city’s economy is still showing continued strength with no signs of slowing down, so it’s hard to say with any certainty that increasing the minimum wage had any measurable negative effects. But on a national scale, the story would likely be different. While millions of people would get a pay increase, millions more might lose their jobs, or at least see their hours cut back.A $15 minimum wage implemented across the U.S. could lead to a loss of 1.3 million jobs, according to a study published earlier this year by the Congressional Budget Office, but it could also increase wages for 17 million workers and effectively lift over 1.3 million people out of poverty around the country.Perhaps the key takeaway at this point is that regions with booming economies may be able to increase their pay floors without creating problems — though there may be more unintended side effects that become apparent with time.Another important takeaway is that Seattle’s minimum wage may actually still be too low to help many workers. A full-time employee in Seattle with a salary of $18 per hour, two dollars more than the current minimum wage, would earn roughly $37,000 a year, for example. That’s significantly less than the average Seattle worker, who makes more than $31 per hour.And with median rents in the city at $2,700, or more than $32,000 per year, a worker earning $18 per hour could end up spending more than 85% of their income on housing. The average Seattle-area household also spends more than $12,000 per year on transportation and nearly $6,000 per year on food, according to the Labor Department.What this means for you will likely depend on where you live, and if federal or local leaders decide to push through with any increases to the minimum wage. A significant increase, say to $15 per hour, might lead to more profound effects, such as job losses, in smaller cities and rural areas. But large, bustling cities like Seattle may absorb it with relative ease.In all, an improvement to the minimum wage may not do much to change the grim reality that living in expensive cities can be challenging even for some people making six figures. As Vigdor puts it, “Good luck living here on an $18-an-hour job.”