Last year when Dan Price, founder and CEO of the Seattle-based credit card payment processing firm Gravity Payments, announced that he would raise the company's minimum salary to $70,000 a year, he was roundly praised by many – and roundly criticized by others, notably his own customers.
It seems that in his zeal to do right by his employees, Mr. Price forgot one key thing – that his customers are small businesses that may flinch at their credit card processor making such a bold experiment that could have a damaging effect on Gravity Payments. After all, paying every employee a minimum of $70,000 annually was a move into unchartered territory and as a small business, you want to be confident that every time your customers swipe their credit card, you’re going to get that money from your bank. Some of his business customers feared forthcoming fee increases and jumped ship while others didn’t want to be associated with what they felt was a political statement or PR stunt.
I’m not saying that what Mr. Price did was wrong or bad – I’m using his story as an example of a more widespread controversy – how raising the minimum wage remains a very touchy subject, and for good reason. All sides must be carefully examined in this ongoing debate, as the push for a $15 minimum wage remains a hot topic. Myself, I prepared for this by starting years ago to pay my employees more and encouraging them to get raises based on incentive and growth – they work to bring in more customers consistently and I share the results with them, simple as that.
Newscasters and political pundits love to take shots at “evil empire” corporations for being stingy while the small business owner gets lost in the real impact of such a heightened minimum wage. Case in point: Consumers want the lowest priced products they can get while at the same time wanting employers to pay nearly double the minimum wage at $15 an hour. This may be possible for big box stores that can deliver the lowest prices due to the supply chain, but not so much for mom & pop operations trying to making ends meet – and these include franchisees that may own a Jimmy John’s or Subway sandwich shop but are still the individual owners. If every small business has to raise their wages, the cost of everything goes up including the prices you pay.
Something I’ve learned from business owners is that when working people get that higher wage, they want to work fewer hours. Why? Because their medical benefits and other benefits come into jeopardy. Giving employees top dollar off the bat also provides no incentive to earn a higher wage, and sends a bad message to those who have put in the long hours, hard work and investment in education to get where they are. Then there is the cost of living – Seattle pays the highest minimum wage in the country but it is prohibitively expensive for average working people to live there. Warren Buffet and Bill Gates both have addressed this issue, saying that upping the minimum wage will not fix the problem but that earned income credit is the way to help the disparity in incomes. And rest assured that these two business tycoons are not making this observation from a place of greed – they are already in a wealth stratosphere that you and I can only dream of. They are being pragmatic, and that’s is exactly what’s needed in this important discussion of the minimum wage.