Posted by: A. C. Cockerill | April 22, 2016

Picoblog Question – 2016 – Post #32

Picoblog Question – 2016 – Post #32

For small businesses, the job engine in the USA, what is the impact of increasing minimum wages?

My two cents, but please share yours:

In the short-term, small businesses (most are struggling, over 80% will fail) will lay off employees to hold the line on ever-increasing costs.

In the long-term, small businesses will turn to automation.

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Responses

  1. Can’t argue with your conclusions.

  2. I disagree. We ran a small business (8 employees) for years and paid well. Liability insurance was the biggest suck on our resources by far, not wages. The problem with the low minimum wage is that it isn’t liveable, so all of us pay to cover the gap, and they don’t make enough to pay taxes, so that burden isn’t broadly shared. A higher minimum wage would reduce dependence on government programs, spread out the tax burden, and create more consumers which would HELP small businesses. Every dollar that goes into an increased wage is pumped back into the economy almost immediately. My two cents 🙂

    • Hi D. Wallace,

      Thank you so much for sharing your experience. Since writing this post, I’ve heard, mostly off-line, a wide range of experiences, some quite similar to and others very different from yours.

      The minimum wage was never meant to be a living wage. Its purpose was to provide beginner job experience for teenagers, who now make up only half of the minimum-wage earning population (should be closer to 100%). The best way to increase living wages is to revitalize small-business startups, the currently shrinking job engine that fuels the growth of the middle class.

      To do this, we need to do three things, reduce the tax burden on these small businesses (US tax rate is the highest in the world), reduce the rapidly growing regulation burden (an enormous expense for many startups just beginning to acquire revenues), and retrain the approximately 47% of the workforce that will lose their jobs to automation in the next ten years or so.

      Automation is arriving. Its disruptive technologies are here, and they’ve already gone global–can’t be stopped. Ultimately, these technologies will lead to exponentially more startups and the jobs these new businesses create. We need to focus on retraining the 47%, get ahead of the curve, before the layoffs begin.

      Cheers, Ashley

  3. I’d understood that minimum wage originated as a protection to northern (union) workers when cheap (non-union) labor was in the southern US. (As a side effect it also protected white workers.) For sure it can keep many teens from getting work and work experience: they’re often not worth much per hour – no skills, no reliable transportation, etc.

    I don’t doubt liability insurance is a frightful expense for a business. It isn’t cheap for a homeowner.


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