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Debating a minimum wage increase

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President Obama made waves on Tuesday by promising a minimum wage increase for federally contracted employees in his State of the Union address.

The next day he visited a Costco store in the Washington suburbs to advocate for higher pay for all hourly workers.

The president chose Costco because its employees earn an average of more than $20 per hour before overtime (well above minimum wage), and the benefits to the retailer are obvious, CBS Baltimore reports. “I guarantee you if workers have a little more money in their pocket, they’ll spend more at Costco,” said Obama.

One Twitter user illustrated a similar point:

Also under scrutiny is the tip wage, used primarily for restaurant servers and delivery workers, which has remained at $2.13 since 1991. The National Restaurant Association claims in a recent New York Times article that raising the tip wage would result in higher prices for diners and fewer wait staff. Worker advocates counter that previous minimum wage boosts that benefited back of house staff did not aversely affect restaurants as critics had warned.

Any changes to the minimum wage seem likely to provoke pushback from supermarkets, too. A D.C. measure for a “living wage” aimed squarely at mega-stores like Walmart led to threats of the retailer reneging on planned stores before Mayor Gray vetoed the law last September.

However, research shows that paying retail workers more results in customers that are happier — and spend more. If retailers like Costco and Trader Joe’s can make higher wages part of their success stories, why can’t all supermarkets do the same?

Discuss this Blog Entry 4

Steve R (not verified)
on Jan 31, 2014

What "research" are you referring to? Every study ever done on the minimum wage has shown that a higher wage equals less jobs and higher prices. I don’t know of any shoppers that would be “happy” about that.

on Jan 31, 2014

The argument (there is really only one being made) against an increase in the minimum wage is completely disingenuous. I expect that from the politicians. I am surprised by it from the business community.

I am a single-unit small independent owner/operator. I know the same thing that all business owners know. The number of people we employ has very little to do with what we have to pay those people or how much we pay in taxes. It is driven almost entirely by how much business we are doing.

History has shown that political moves to arguably try to encourage investment and hiring, such as tax amnesty, lowering rates, and removing worker protections and keeping wages low, never results in the intended consequence. The money simply goes directly to short-term profit and/or executive bonuses.

What all business owners know is that they hire more workers when they have more business--which means their customers have more money to spend. This is likely even more true in the grocery and restaurant industries. Higher wage-earners are already spending in those businesses at normal rates. More money in the pay checks of lower wage-earners means those people have more money to shop and to eat out.

It may be difficult for most businesses to unilaterally raise their workers wages. I applaud those who have. I cannot. But if everyone raised their wages in unison, it would only benefit all businesses as they begin to experience higher sales volumes because those whose spending has declined have more money to spend. (And this besides the benefits in more committed workers and lower turnover.)

This was proven true when Ford almost single-handedly created a larger middle class with more spending power when they decided to grow business by paying their workers more than was normal at the time.

So disingenuous or just short-sighted, the argument just doesn't hold water. What we all need is for our customers to have more money to spend. And we need that increased money at the bottom--not the top. Those at the top, no matter how much money they have, can only spend so much of it on groceries. But those at the bottom offer a lot of growth potential to our businesses. Instead of parroting the politicians and CEOs, we grocers should consider the long-term growth of our businesses and join in the efforts to raise the minimum wage, because when we do, we all benefit in the long run in lower employee acquisition and training costs and higher sales.

Super Market Realist (not verified)
on Jan 31, 2014

While I agree that minimum wage ($8.00 in Massachusetts) is not and never will be a living wage, consider the impact on a supermarket Front End should the minimum wage increase to $10.00/hr. Is it reasonable that stores will continue to employ minors (<18 yr olds) who are unable to do many job functions in Massachusetts? Between hour restrictions, limitations on use of balers, slicers, power equipment, etc MY store would opt to hire only 18+ applicants. Also, those older associates are very likely earning $10. or more now.

Why not a two-tier minimum wage; <18 yr olds remain at current $7.25/hr and 18+ increase to $10/hr?

Further, many service jobs were never intended to be 'head of household' jobs. The real issue is lack of good-paying career jobs. To President Obama, BEGIN to focus on your own house (Federal spending) and stop tinkering with the private sector.

Robert_Boxer (not verified)
on Jan 31, 2014

I wrote an article recently about how an increase in the minimum wage rate increases unemployment. You can read it here: http://wp.me/p3N9zD-4e

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