A Small Business Owner’s Case for Raising the Minimum Wage

Commentary about business and finance.
April 22 2014 10:19 AM

A Small Business Owner’s Case for Raising the Minimum Wage

It will level the playing field for big corporations vs. the little guy.

Activists chant for higher wages outside a McDonald's.
Activists chant for higher wages outside a McDonald's restaurant on April 8, 2014, in Stamford, Conn.

Photo by John Moore/Getty Images

Nine or ten dollars an hour? Twelve? Or all the way to $15?

For much of the country, significant minimum wage hikes are coming—at least in the areas where they haven’t happened already. Public debate on the issue in many states and cities has been reduced to a disagreement between the forces that want to keep increases to a small amount per hour and folks like Chicago’s “Fight for 15” group and new Seattle Mayor Ed Murray who propose a $15 per hour target.

People getting paid more for their work is a heartwarming notion, so it can feel pretty easy to get behind a $15 minimum wage on an emotional level. In terms of a more mathematical analysis, one sees macroeconomic cases made both for and against a high minimum wage: either that putting more money in the pockets of working people will strengthen spending and the economy or that increasing labor costs to business will result in higher unemployment.

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We can talk macroeconomics all we want, but I believe most of us are going to give or withhold our support for raising the minimum wage based largely on our perceived self-interest. So with that in mind, here’s my self-interest: As a small business owner in the restaurant industry, I think a higher minimum wage is great for my business and me. Make the wage $15 an hour. Make it $20. Make it high enough that dishwashers get paid like office workers.

Here’s why. A higher minimum wage helps reduce the structural advantages large corporations have over small businesses, and that in turn helps create a context where high-quality independent businesses can thrive by overdelivering compared to our better-capitalized, but mediocre, big competitors.

When individuals like me start businesses in our communities with the intent of selling quality goods and services, we quickly find that our biggest obstacle is the low prices offered by large corporations. The issue isn’t that those companies are selling the same things we are for less. The issue is that the low-priced commodities sold by superstores, warehouse clubs, and restaurant chains influence our customers’ understanding of what everything costs.

For example, the reason it’s hard to sell a really good, locally produced burger in many markets isn’t because the product isn’t worth it; even $10 or $12 for a handcrafted product that includes 6 ounces of grass-fed beef is a steal compared with what you can buy at Applebee’s or Olive Garden for that price. The reason it’s hard to market a high-quality burger is that so many companies sell burgers so cheaply—regardless of how bad they are—that we think a burger “should” cost only $5 or $6.

Here’s what rubs me—and many other small business owners—the wrong way about this: The reason these companies are able to sell commodities so cheap while making a profit is by passing off certain costs that we small businesses can’t. For instance, large agriculture businesses can raise their meats in areas with lax environmental and employment regulations, which means, for instance, that many of the costs of producing pork get borne not by Smithfield Foods but by the residents of Tar Heel, N.C. Similarly, megaretailers and other national concerns can inexpensively move goods from remote locations to their stores in trucks whose use of the roads is heavily subsidized by everyone who drives a car.

Subtly, a nonlivable minimum wage—and in most areas minimum wage is well below a livable wage—is also a kind of passing off of costs by the big guys. Though their employees work a full-time job, they can’t afford health care, education, quality food, or a healthy routine. That leads to a situation where 52 percent of the families of fast-food workers are enrolled in a public assistance program and the average Walmart employee costs taxpayers $5,815 in subsidies.

Now, if the minimum wage were raised high enough, the cost of human resources would have to be borne in full by their employers, large and small. In turn, everyone will have to raise prices—and the prices the big guys charge for their products will be closer to their true costs.

A world where items are priced near their true costs is a world that we small businesses already live in. We can’t easily pass many of our expenses onto the taxpayers. We typically lack the resources and scale to make it feasible to move our production far away to cheaper jurisdictions and invest in our own subsidized transportation networks. But if labor becomes a bigger cost for large and small companies alike, the subsidies that benefit large businesses will be less relevant, and us little guys will be competing on a less slanted—though still not level—playing field.

A semilevel playing field is good enough for me. Like many small business owners, I know that if the big guys have only some advantages over my team, we can make up the difference in quality, service, and heart.

Jay Porter operated San Diego’s farm-to-table restaurant The Linkery for about a decade; his new restaurant, Salsipuedes, will open in North Oakland later this year.

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