Raising the minimum wage is a big topic in Washington right now. It always seems to be. Why? Well because it’s something that makes the masses feel good.
“Yeah! We’re getting paid more!”
As a small business owner this is a topic that frustrates the crap out of me so today I want to discuss it using a dwindling human skill called logic!
I recently was talking to a high school student who works at McDonalds. She said that they need to serve 300 people an hour to meet their goals. Why? (Watch out…logic coming!) With the expenses McDonalds has and the price of their products the profit margin per order is very small. Thus they must serve many items in an hour.
Let me freeze here and explain why I’m using McDonalds in this example. First, fast food is one of the major places that people are paid minimum wage. Second, it’s a business that almost everyone interacts with on a regular basis. That being said, this logic can be applied to all types of businesses.
So, let’s pretend the average worker at McDonalds gets $7.25/hour. I’m not sure that’s the case but that is certainly the lowest average because of the current minimum wage. Of course being paid that little is a crime against HUMANITY!! So let’s raise the minimum wage to $10! Now someone can make a real living.
That’s a 38% raise in wage. So what could happen?
- They could up their goal of customers served each hour
- McDonalds could raise the price of their menu items.
- The company cuts their profits
- A combination of any of these.
The first thing most people say is, “Screw those greedy companies! Why should they be making such a profit!”
Could the company be making a disgustingly large amount of money and have no need for that? Sure. But, is it our job, or the governments, to tell you how to spend your money? If you’re the owner of a small business do you want someone telling you how much money you can make for your business? Do they know the blood, sweat, and tears that have gone into what you’ve made? My question is why does that thought change if I run a large company versus a small company? Do the rights of the person who started the company somehow change if it gets past a certain size? I sure don’t want it to change for me if I were to spend years building a company that became big.
I don’t think we should be in the business of telling a company how much money they can or can’t make. So we’re left with upping the price or serving more people per hour. My guess is that a business would work on both of these. They would have an increase in prices and also try to serve more people.
I’m not sure about you but McDonalds has never been the epitome of customer service. Why? Because they have to serve 300+ people per hour to make their business model work. They don’t have the time to have customer service. If you want that kind of service you’re going to have to pay for it with higher food prices. Now if they have to serve even more people the service is going to get even worse. With a combination of serving more people and a slightly higher price you’re going to be paying more than before and getting a crappier experience.
Now, you may have gotten this far and said, “Ok, I can deal with paying a little more and maybe a little less customer service as long as that high school kid working the fryolator get’s paid a decent wage.”
AWESOME! Just do me one favor…I don’t want to hear you complaining about higher food prices or crappy service! You asked for it.
Of course none of this brings up the issue of who actually is getting minimum wage and what effect it might have on unemployment. Frankly, I know I can’t pay anyone $10/hour to serve a few cups of coffee and a latte every hour. So say goodbye to your local small town coffee shop. Though most of you don’t mind you’d rather see a global company like Starbucks come in.
In a future blog rant I’m going to discuss my thoughts on supporting local businesses…stay tuned!
P.S. – Just to make some of you angry (hehe) my ideal solution would be to get rid of ALL minimum wages! I’d settle for states being in charge of their own if I had to.