By now, most of us have reached a steady state conceptually related to raising the minimum wage. Reasonable people can agree that we should pay people as close to a living wage as we possible can, right?
Then, of course, it all goes to hell.
Consider Florida's recent passage of Amendment 2 on Election Day 2022, which few are aware of and is going to shake things up in a big way. A few details from the Wall Street Journal:
"Florida voters’ approval of a $15 minimum wage is fueling the hopes of advocates who aim to pass similar measures in other states, though still-elevated unemployment and lower costs of living in rural areas remain challenges.
More than 60% of Florida voters supported Amendment 2 this month, setting the state on a path to a $15-an-hour minimum wage by 2026. The measure’s success was notable because of Florida’s conservative leanings and the struggles its vital tourism industry, where many low-wage workers are employed, has faced this year as it dealt with the shutdowns and travel restrictions brought on by the coronavirus pandemic. Florida’s governor is a Republican, and voters there backed President Trump’s re-election bid."
States are starting to take things into their own hands as the Federal Minimum Wage sits at $7.25. I promised you Pros and Cons, so here goes - for Florida, but it really applies to any state looking to elevate the minimum wage to $15.
--People at the lower end of the labor pool have a better chance to make it on one job.
--That's about it, which is important, BTW.
CONS AND S**T TO FIGURE OUT
It blew my mind a bit to see Florida carry this 60/40 in November. It's one thing to say you're raising the minimum at Disney, which once the pandemic recedes, has pricing power and leverage over all the people who long to wear mouse ears and eat a big drumstick walking around the park. For everyone else, it's a bit of a sh*tshow from a business perspective.
Here's my list of the biggest problems that business has to figure out - one that everyone knows and one that no one talks about.
1--Duh - It's a small business killer. Do the math for any owner of a Subway anywhere in Florida or an independent tourist-related business in International Drive in Orlando (the ones living on the edges of the Disney dream), and it's easy to see moving from $10 to $15 per hour is brutal. Where does the money come from? Well, it's either got to come out of your pocket as a consumer via price increases or the low margin businesses can't work.
2--The big hidden cost here is wage compression in any organization. Nobody talks about this one, but raising the minimum wage and increasing what you pay your entry level workers by $5-$7 not only increases your operating expenses, but it creates compression with all other experienced hourly workers, as well as the low-level salaried workers. The biggest place this hits is in your "leads" (the hourly folks with the most experience) and your first-level supervisors. You know what's coming - you either pay those people as well to eliminate the pay gap elimination that occurs due to a big bump in the minimum wage, or you deal with the festering dissatisfaction.
What you'll hear if you don't deal with the compression - "Well, why should I deal with all the BS if I can make roughly the same to just clock in and clock out - and I'm OT eligible"!!
Wage compression associated with the minimum wage increase is the storm on the horizon, the Jason from Friday the 13th with the mask/chainsaw.
Don't feel bad for Disney or any big company related to this - most aren't paying their share of taxes anyway, and this is just a redistribution related to what they should have been paying. Feel bad for any company with 100-1000 employees with moderate margins. Consumers aren't mature enough to consciously pay more in a rational exchange for the increased living wage. They migrate to where they get the same product the cheapest.
Hello living wage - a good thing. Goodbye lots of small businesses - a decidedly bad thing.
Get ready to see tenants in strip malls near you with 50% occupancy spaced out - with available spaces between active business - to maximize the appearance of a robust business environment. Good times.