New minimum wage laws are driving many smaller companies out of business. Will more follow?
As I write this the employees at O’Hare Airport are on strike in conjunction with multiple Fight for $15 rally’s spread across the country. Bolstered by support from unions, particularly the SEIU, workers are trying to get increases to $15 per hour. Is it working? Or are they shooting themselves in the foot?
Who is affected?
One of the prime targets for the Fight for $15 has been McDonald’s. What has been McDonald’s response to this? Automation! According to an article in Forbes:
“Earlier this month, McDonald’s announced the nationwide roll-out of touchscreen self-service kiosks. In a video the company released to showcase the new customer experience, it’s striking to see employees who once would have managed a cash register now reduced to monitoring a customer’s choices at an iPad-style kiosk.”
Many strikers and the unions leading them think that trying to raise the minimum wage will force larger companies to capitulate. However, larger companies have the wherewithal to make investments in technology that make nonskilled workers unnecessary. The companies most hurt by this movement are small businesses who have small margins and lack funds to make technology investments.
Facts about small businesses
Small business is defined as one that has fewer than 500 employees. Many of them have many fewer than that. Many of the business owners put a lot of the money they earn back into the business. They grow slowly in many cases, faster in others, but to grow many add workers that are paid minimum wage, such as the food business or retail, other have to start workers at much higher wages, such as engineering firms. It is these small firms that account for 65% of the jobs created since 1995, according to one Forbes article.
Some businesses are closing shop due to $15 per hour
There are 543,000 new companies formed every year, but more than that go out of business every year as well. Over have of the businesses started go out of business in 5 years of less. So what happens when these businesses that create 65% of the jobs in the country are faced with rising costs? The rate at which they close their doors is accelerated. Here is the story of two businesses in California that had beat the odds by staying in business for much longer than the average. Now they are having to close their doors because of the passage of the $15 per hour minimum wage in California. Watch the videos and get a feel for the struggle on the other side. The employees for these companies, who had good jobs, are now out on the street because of $15 per hour.
I have no problem people being paid a wage that is commiserate with their experience. If you look, as I did, skilled jobs almost always earn far better than minimum wage and I am not talking jobs that require college degrees. Welders, dog groomers, and many other blue collar jobs make some good wages. People with a willingness to learn can earn something commensurate with that learning. Without a willingness to learn a skill, to make yourself valuable, you will be confined to unskilled jobs watching people use technology that has taken your job. Or you can join a union who promises they can get you that wage or move to a state where the legislatures are willing to spend someone else’s money. Good luck with that.