Currently, federal minimum wage is set at $7.25 an hour. It was last increased in 2007. Some states have passed laws to increase the hourly rates up to a maximum of $14 an hour ($15 in DC), but as of the time when I authored this article, 21 states have not passed any laws to increase wages in their states.
Before I get going, I’d like to point out that I don’t have a background in this subject (other than coming from a dirt-poor family that often struggled to put food on the table) and this article represents my opinions on the subject, based on the work that I do and the role that I currently fill.
I work with approximately 100 Powersports, Marine, and RV dealers across the nation. Pay is a topic that arises in many of my meetings with dealerships. As a blanket statement, of the dealers that I consult with, not many of them have positions in the dealerships that pay employees the minimum of $7.25 an hour. Most offer more than this, and a significant number of dealerships offer additional benefits such as health care and retirement packages.
I also have a stake in a Powersports dealership. Our ownership has taken the stance that we will not have any positions where the employee’s sole compensation will be minimum wage. We believe that if one of our team members is spending time worrying about how he/she will pay rent and put food on the table, that he/she won’t spend time thinking about how to best take care of our customers.
For dealerships that do have positions at the bottom end of the wage scale, most of them are for either part-time positions (gas-pump attendants, wash rack staff, etc.) or for other unskilled positions. Many of these employees fill short-term positions to assist when business is at its peak. A lot of dealerships use these entry-level positions to vet employees for other positions in the dealership that require more skills, ones that offer improved compensation packages.
2021
With the balance of power having shifted in DC, it’s likely that we will soon see some form of legislation to increase the federal minimum wage. While it’s a topic that comes up every year, there has never been the will or votes to pass a new law. While $15 an hour is the number that is most often used, I don’t think we will instantly get to that point.
Expect to see some iteration of a stepped program, possibly with a starting point around $11, and then annual increases up to the cap. I also expect that we will see some type of an annual cost of living adjustment, so that the rate will keep up with inflation through automatic annual increases. And, there will be some jobs that are exempted from the legislation. The industries with the best lobbying groups will receive those carve-outs.
So what are the pros and cons of an increase in the country’s minimum wage?
- Cons
- Business cannot absorb all of these new costs and prices of goods and services will rise for all Americans.
- Some very low margin industries that cannot adapt might fold.
- More work could be outsourced to other countries.
- Many industries will adapt to use robotics and technology, thus forever eliminating some entry level positions.
- Some business that employ no-skilled/low-skilled or seasonal employees may no longer hire for these positions.
- In a global economy, American made products might become even less competitive than those items made in countries with significantly lower employee costs, reducing American exports.
- Pros
- More money in the pockets of Americans means that more people have money to spend on “stuff”.
- Increasing wages means that more people can survive without having to rely on private and public assistance programs.
- Increased payroll means that tax collections will increase, helping to offset our staggering national debt.
- Employees who don’t have to worry about affording the basic life necessities can focus more on the work they were hired to do.
- An increase that applies to all 50 States levels the playing field for businesses in each industry. Everyone moves to a similar cost basis for operating the business and no one has to compete with a similar business located across State lines that can hire people for significantly less.
The argument that continues to come up is that if employees want to earn more, they should develop the skills to command more. I tend to agree that drying cars at a car wash or flipping burgers should not be seen as a career position, and I struggle to see paying someone in one of these positions $15 an hour. However, I’m not sure how you pick winners and losers with this type of legislation, not without making it extremely complex and onerous to comply with.
The counter to the argument is that if everyone makes a “living wage” then there is a lot less pressure on public resources. Things like food stamps and rent-assistance could be significantly reduced if the average American can afford the necessities of life. If people can set aside some of what they make (a savings account or money under the mattress), then they can better withstand emergency situations. If Americans make more, they can also participate in retirement programs. Studies show that a large percentage of Americans have no money set aside to support them after their working years. Ultimately, those costs will fall on the rest of us.
Not many of the dealerships that I work with have expressed concern over this pending legislation. The 20 Group provider I consult for, Spader Business Management, has long focused on helping dealers to improve the efficiency and productivity of their employees. When done right, a dealership can complete more work with less employees, while also paying significantly more than other less efficient dealers.
While dealers will have to rethink some positions in the dealership, I doubt that a raise of the minimum wage will impact many of the industries high-performers. It will push some dealers over the edge, but I don’t see it as being a large number. For as many dealers who struggle to adjust to this change, I see an equal number who will benefit from a population that has more disposable income.
Change is hard, but it’s not worth wasting time worrying about the things you have no control over. What are your thoughts on impending changes to the federal minimum wage?
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