Saturday, February 15, 2014
Remove the hype, histrionics and hubris from the minimum wage debate, bring in some hard numbers and a touch of humility — keep in mind that we are all human — and maybe something good will happen.
The state of Washington House Bill 2672 would increase the state’s minimum hourly wage, currently $9.32, to $12 in January 2017. What happens when a state raises the minimum wage by 30 percent in three years? We don’t know. San Francisco moved its minimum wage from $9.92 to the current rate of $10.74 in three years; a whopping 8.3 percent increase.
I went online and looked at the analysis statement for HB 2672. It restates the bill, but provides no analysis or any hint of research. Where are the qualifiers and exceptions? Is this is a “show” bill, meant to create political points but not real legislation? Why are there no ifs, ands or buts in this bill? I think it needs a few.
It is difficult to take this legislation seriously. With no research or impact analysis it must be based on the assumption that all employers could absorb an increase in the minimum hourly rate of roughly $1 an hour. No doubt many could. But how many? And what about the charities, community service organizations, local governments, new businesses and struggling business?
My cynical side wonders how many more businesses would avoid wage and hour rules altogether and pay employees off the books if this minimum wage proposal is passed.
And why do politicians think they can predict what should happen three years out? In January of 2007 how many economists and politicians predicted that within a year a great recession would be upon us? And who predicted — with any remote degree of accuracy how various businesses would handle the recession? Which would thrive, which would barely survive and which would die? Should we mandate wage increases three years out when we can’t predict one year out?
Recommendation: Do some analysis. Get a good, representative sample of payroll data from each region of the state and from a variety of industries and types of employers, including nonprofits and local governments. Don’t assume — find out what the impact would be — and then put forward a proposal to raise the minimum wage.
And maybe we could take a careful look at what a living wage is in different regions of the state. If there are real differences, don’t mandate a statewide wage; consider two or three that are fine-tuned to regional economies.
Or modify the legislation. Make an adjustment to the minimum wage — not to exceed $1 an hour — for just one year and then carefully monitor the impact on economic growth, unemployment and the demand for safety-net services.
Assumptions are the root bad policy. It’s a mistake to assume that the corporate buffoonery of Wal-Mart and McDonald’s is typical of large corporations. Many large businesses currently pay all employees a wage that is at or above $12 an hour.
And it is a mistake to assume that most small businesses would have to cut staff if they were required to pay an $11 or $12 minimum wage. Some would be fine and some would struggle. The small employer with a large number of employees in low-wage jobs could be hard pressed to absorb a 10 or 15 percent increase in labor costs. Do we know how many employers would be in that situation?
A little knowledge and trust can make a big difference. Here’s what I know from many years of analyzing, auditing and designing all kinds of pay programs for all kinds of companies large and small.
Most employees assume their employer makes a lot of money and could pay higher wages but chooses not to. They don’t realize that payroll and benefits are by far the biggest operating costs in a business. If the employees are busy and the business is chugging along every day, how can it be that the company isn’t doing well financially and can’t afford to hand out nice pay increases?
When I was hired to fix or change the pay policies of a company I also had to ensure employees had a realistic picture of their employer’s financial situation. And once they understood, they wanted to know what to do to improve things.
The flip side of that coin is that managers too often assume that employees don’t care or can’t understand the complexities of business. Or that employees can’t be trusted with information about costs or revenue.
Now, based on my own experience — and a lot of research — when management shares information about the business with employees and employees grasp how their daily performance affect revenue, quality, customer retention and costs — and the size of their paycheck — the business does better and the employees can be paid better.
The best way to raise wages isn’t by state mandate, but it would be naive to assume most business managers will voluntarily give employees a bigger piece of the pie in exchange for improved profitability. We have lots of evidence to the contrary.
We have minimum wage laws for a reason — employees need some protection, fair treatment and a fair wage for a fair day’s work. But if we are going to raise wages, do it with good information and do it carefully.
Virginia Detweiler, based in Walla Walla, provides human resource services and management training to businesses in southeastern Washington with her firm HR Partner on Call. Her columns rely on reader questions and comments for topical material. Because of job and employer sensitivities, care is taken to protect identities. Contact her by email at email@example.com or phone at 509-529-1910.