This week, a Portland task force will hear final discussions on Mayor Michael Brennan’s proposal to increase the city’s minimum wage. While the hearts of advocates may be in the right place, heads most certainly are not. A minimum wage hike to $9.50 per hour in 2015 and possibly even to $10.75 by 2017 would create economic hardship on locally owned businesses that will hurt job opportunities for the very people that the wage hike is intended to help.
These businesses are low-margin and low-profit, generally making only a few cents for each sales dollar. They also devote a third of their budget to wages and benefits. A $2-3 dramatic hourly increase in the cost of labor would force these small business owners to make some hard choices. Currently there are very few employers who even pay minimum wage, especially in the foodservice industry in Portland, but this increase would create upward pressure and cost on competitive wages currently paid to our employees.
The proposed elimination of the tipped minimum wage would be particularly devastating to restaurants, costing approximately $10,000 annually per tipped employee. Servers and waitstaff are already among the best paid in restaurants, making well above this proposed increase at an industry average of between $16 and $22 per hour. If the tipped minimum wage were to be eliminated it would have dire consequences for Portland’s dining scene.
When faced with such an increase in the cost of labor, one option for restaurants is to raise prices, but people often choose to stop eating out when prices suddenly increase. That’s why price hikes often lead to lower overall sales or a loss of revenue at restaurants, especially when competing businesses across city lines can offer cheaper prices.
An alternative to price hikes is to explore technology advances that will alleviate labor costs, but this will also lead to fewer job opportunities for entry-level employees.
In the end, to meet the high costs of a minimum wage hike, businesses are left with little choice but to scale back employee hours or eliminate jobs altogether. Given our still struggling economy and other increasing government regulations on business, this is one step closer to insolvency.
Mayor Brennan’s proposal would set the minimum wage even higher than the proposed federal wage increase to $10.10. According to a recent report released by the nonpartisan Congressional Budget Office, the national push to raise the minimum wage to $10.10 per hour would cost 500,000 jobs nationally in 2016.
It’s important to understand that the minimum wage is an opportunity wage. It gives young and lesser-skilled employees a starting point to acquire skills, experience and learn work ethic that will take them to that next rung on the job ladder. Restaurants provide first job opportunities and on the job-training to 1.5 million teenagers and 2 in 5 restaurant employees are under the age of 25.
Those that start at minimum wage and work hard advance quickly. Restaurants remain one of the few industries today that offers a clear entrepreneurial career ladder—from dishwasher to line cook, from busser to server to management and someday ownership. 80 percent of restaurant owners started in an entry-level position within the restaurant industry.
Sadly, a mandatory wage increase could further restrict these job opportunities and path for young and lesser-skilled individuals.
But a minimum wage hike wouldn’t just impact jobs. It would also undermine our city’s economic competitiveness. Businesses in areas surrounding Portland would have an economic advantage over us. While our businesses suffer from burdensome new costs, those across the city lines will be able to offer sales and prices that we just can’t match. That means less business coming through our doors and less tax revenue coming into the city.
Portland business and residents will have an opportunity on August 20th to speak their mind on this important issue. Let’s hope the city’s task force will listen.
12 Comments
It’s doubtful the ultra liberal Portland City Council, and the seemingly disconnected from reality Mayor Brennan, will listen do anyone who opposes their rainbows and unicorns socialist utopia delusions, particularly not evil, greedy business owners. No they’ll charge headlong into making this terrible idea a reality and then be confused when the consequences of their basic lack.of understanding of economics hits them over the head.
This should serve as a reminder to Steve that a government big enough to give you everything you want (Cumberland County Civic Center) is strong enough to take away everything (minimum wage) you have !
Last week’s Franklin Journal published “Small businesses want minimum wage increases” by Holly Sklar, CEO of Business for a Fair Minimum Wage. The woman has a career writing exposes of the horrors of capitalism. Googling reveals no evidence that she has any experience running a business of hiring minimum wage labor.. Steve DiMIllo, by contrast, is authentic.
Coming to a town near you.
It’s not just a minimum hike, it’s a hike of the entire wage scale, because everyone above who is more skilled or experienced will rightly claim that they should be paid more. That is often the real impetus for unions to support these. The whole scale goes up.
Thank you Steve for standing up, again, for common sense. It seems the Portland City Council and Mayor are tied to the notion that high taxes, debt and now a crippling wage mandate will foster growth. I’m happy to say I’ve sold my interest in Portland.
“It’s important to understand that the minimum wage is an opportunity wage. It gives young and lesser-skilled employees a starting point to acquire skills, experience and learn work ethic that will take them to that next rung on the job ladder.”
If that were actually true, I’d agree, but there are many Americans left behind by the trickle down 80’s, the tech bubble burst 90’s and the Great Wall St. Recession of 2007-2008. Some people work full time at Wal Mart or Rite Aid, are single moms, sleep in their cars until their next shift, etc.
The “bootstraps” ethic proposed here is fine on paper and makes conservatism sound reasonable until you talk with these millions of Americans who don’t have the opportunities of acquiring skills and going to that “next rung” on the ladder. These conservative platitudes mean nothing to those who struggle. On top of this conservatives want to take away most of their lifeline in the form of “entitlements”, “nanny state benefits”, “cradle to grave free stuff”, “goodies”, etc.
IF only conservatism worked in real life America in 2014 as well as it did as a heart warming story of Horatio Alger economic theory on paper.
Great job steve we should start a petition too bring it to a vote because i ll have to lay people off hate to .
According to the polls, raising the minimum wage–which has fallen far behind inflation in recent years–is strongly favored by most Americans. I think the approval figure is in the 80% area. There is a reason for this, outside of the fact that employees deserve a living rage. The reason is that every time the minimum wage has been raised in the past, it has had zero effect on employment. This is the case over the last 50 years or so. But I have another thought here: Why should DeMillo’s–or any other company–make a profit while not paying employees a living wage. This is cotton-picking and plantation thinking.
This is funny. I think they’ll rescind the change in minimum wage as soon as MHPC moves to SoPo. The Mayor and Council don’t listen to the Chamber anymore. If the Coucil gets its way, there will only be non-profits and government entities left in Portland. This minimum wage should be a boon for the surrounding towns. Scarborough looks business friendly. And Biddeford/Saco ain’t so bad.
On that note, maybe we should vote in favor of the higher minimum – right after investing in moving companies.
jooouli
Portland Wage Hike Potentially Devastating to Small Businesses