From highly publicized fast food worker walkouts to stumping politicians, the minimum wage debate has gotten loud in recent months. Amid all of this noise, one voice that frequently goes unheard is that of the business owner, especially those who employ fewer than 500 employees.
According to statistics compiled by Forbes, more than half of the working population works in a small business. Small businesses have generated more than 65 percent of net new jobs since 1995 – that’s nearly two decades of new job creation resulting from the American can-do attitude of small business owners.
This is why we are pleased to see the Wall Street Journal publish an op-ed by CKE Restaurants CEO Andy Puzder. In the piece titled, “Minimum Wage, Maximum Politics,” (subscription required) Puzder explains that public policy is often shaped at the expense of the very free market system that paves the way for such economic freedom and prosperity.
Puzder is also a Job Creators Network Foundation CEO leader who tirelessly gives voice to fellow business owners who are caught between the minimum wage advocates and employees. His op-ed explains that in the restaurant industry, a federally mandated minimum wage increase of 40 percent, (from the current rate of $7.25 to the oft-discussed $10.10) would force employers to pay more than the employees contribute to the restaurant’s overall profits:
“The point is simple: The feds can mandate a higher wage, but some jobs don’t produce enough economic value to bear the increase. If government could transform unskilled entry-level positions into middle-income jobs, the Soviet Union would be today’s dominant world economy. Spain and Greece would be thriving.”
Puzder says when faced with a 40 percent increase in labor costs, business owners face tough decisions that are made to sound unpleasant, but are necessary to keep the doors open:
“They will cut jobs and rely more on technology. Such changes are already happening in banks, gas stations, grocery stores, airports and, more recently, restaurants. Almost every restaurant chain in the country from Applebee’s to McDonald’s is testing or already implementing automated ordering with tablets or kiosks.
The only other option is to raise prices. Yet it would be near-impossible to increase prices enough to offset the wage hike, particularly given today’s economic conditions. More important, price increases burden consumers, particularly those with low incomes who are supposed to be helped by a minimum-wage increase.”
Another JCNF CEO leader, Mike Leven, President and COO of Las Vegas Sands stresses this impact in a National Review Online op-ed. In addition to minimum wage mandates, Leven and co-author Lee Habeeb describe the harm that would erupt from a National Labor Relations Board recommendation to force corporations to co-own individual franchises:
“Franchising supports over 18 million U.S. jobs and adds more than $2 trillion to the national economy. Millions of jobs would be put at risk by this ruling, and the value of hundreds of thousands of small businesses could potentially be harmed.
Who will suffer the most? The little guy and gal, including over 200,000 minority-owned franchises. One out of every five franchise owners is a member of a racial minority, employing many more minority employees and often doing that employing in minority communities.”
Both Leven and Puzder have laid good groundwork in getting business leaders to talk about the ramifications of heavy-handed government mandates such as forced minimum wage hikes and upending the franchise business model. It is our hope that business leaders will also take this message to the people who will feel the most impact – their employees.