I was in a conversation with an acquaintance a couple of nights ago. We happened to be discussing my column about local businesses and how tough it is to be in business for yourself. The conversation, of course, turned to finding employees, which is dang near impossible for businesses.
I tried to hire another employee a couple of months ago. After putting a job posting on the Department of Labor website, I began to get some applications. Out of the dozen or so that I received, most did not even come close to meeting the minimal requirements for the job. Of the three that did, only one actually showed up for the scheduled interview. One called in 'sick', while another never even responded to our calls to set up an interview. A fourth was called but "wasn't really interested" in the position.
It was clear that the majority of the applicants were only applying for the job in order to meet the requirements that they continue looking for work; a requirement that is necessary in order to continue receiving unemployment benefits. It was a waste of my time, not to mention our money.
When I worked for human resources at Freeport McMoRan, we tried calling a couple of employees back to work. One employee in particular did not respond to the phone calls nor the letter. The company's rules required that we get a response before moving on to the next person in line. I finally saw him at, of all places, Wal-Mart and asked him if he was going to come back. He moaned and groaned and said his wife was making him go back, but only because of the health insurance. He was making almost as much being on unemployment, getting food stamps and so on, that he'd made while working. Not to mention he spent his time hunting, playing golf, drinking beer.
I've said it dozens of times on the show, the safety net put in place to help people has become a paycheck and a darn good one at that. The CATO Institute recently conducted a study of the value of all benefits a person or family might get if they were unemployed. There are some flaws in the study but the point is well made. In 13 states those receiving benefits make the equivalent of over $15 an hour. In Hawaii, the value of the benefits is about $60,000 a year. Tell me that's not an incentive to quit working. Thirty-four states, including NM at about $13 an hour, are over the minimum wage.
The tough thing is that a small business person has to essentially compete not only with big business but now the government for employees. The government has essentially an unlimited purse while a small business struggles to make ends meet or if successful, can't continually raise wages so that the cost of employees is out of line with sound business practices.
Which brings me to point numero dos: continual discussions by many in our local governmental circles to increase the mandatory minimum wage to something around $15 an hour. Many of us that graduated from public school, when you were actually required to learn subject matter, know that this is a bad idea with unintended negative consequences. It's an idea put forth by people who don't have business experience or if they do, in my experience, are not paying their own employees $15 an hour. Can't figure that one out, it's kind of like Warren Buffet saying taxes on rich people need to be higher, yet he's fighting over a $1 billion tax bill with the IRS.
But let's take a look at the experience of one of the most progressive cities in the United States, Seattle WA. The fine folks on their city council, who care about the poor, downtrodden working class more than anyone else, decided to implement a mandatory $15 minimum wage applicable to businesses in the city limits. As I understand the plan, the wage would increase periodically until reaching the $15 threshold later this year. So what has been their experience?
Kathrina Tugadi, owner of the popular El Norte Lounge, said she no longer hires musicians for dinner because she can't afford it. That money is going to pay her employees, leaving the musicians out of work. Kathrina is also closed for lunch now and is worried about being able to stay open. She tried absorbing the increased expense of the minimum wage but her profit margin is so tight, she was losing money. When she increased prices, fewer customers resulted. So the employees that were supposed to be helped by the wage increase are working fewer hours and taking home less money. BUT, they are being paid more per hour!
Pagliacci Pizza is a local chain; they are moving their call center out of the city limits because of the increased cost. Those employees that want to keep their job will have the job but they'll have to commute, which increases their expenses. A company spokesman said, like many businesses, the cost of doing business has increased over the past few years, not just in wages, but regulations, utilities, inventory and adding increased wages cuts into an already thin profit margin. Now many of those people who were supposed to be helped by the wage increase are making zero dollars an hour. Oh, that's right, they can get unemployment, food stamps and make just as much staying home and smoking the ganja now. Maybe that's what the city council wanted all along, to help support the marijuana industry.
Even the Seattle Times, which supported the ordinance, is now having second thoughts. They published a graphic which shows how the cost is affecting restaurants; prior to the mandatory increase, a typical full service restaurant spent about 35% of its expenses on labor and had a 4% profit margin. Now the increase has pushed that percentage up to close to 40% eating away at the profit. Managers and owners have to raise prices, and this leads to fewer customers. The Times article says they are finding businesses in all sectors cutting back on employees and hiring, leading to fewer people in the work force.
Who knew that would happen? Besides everyone that has watched this happen before.