Tuesday, March 10, 2020

Death of the Service Industry / We Are Lazy

When I first started this blog post I was a worked up about the current talk of raising the minimum wage to $15hr. My business senses kicked in. I could not believe how many people seem to not understand basic economics. One of the dumbest arguments on the internet is if you cannot afford to pay someone $15 a hour your not running your business right. We will call this dumb argument #1.

Businesses have to compete. They must create a product or service that people actually want and sell it at a price people are willing to pay. A business can create a great product or service that people really want, but if they price it too high due to unrealistic labor costs then the consumer won’t buy it.
Somehow when we talk about tariffs we seem to understand this effect. News story after news story about how if you add a tariff to a item it will raise the price and make it harder for the consumer to afford but if you increase the labor somehow this won't have any effect on the price of the product or service? Where are these people getting this stuff? Of course that also leads to the second dumbest argument by the people pushing this increase. They always point to the Walmarts and the salary of the CEOs as proof that $15 a hour is possible.

Most people in the United States are employed by a small business. These small business' cannot afford these types of increases in labor. If you point this out they go to dumb argument #1.
Wages and benefits are paid based on the selling point of the product. A good part of this is determined by the skill level required of the employee. The higher the skill set required the more an employee is worth. It’s supply and demand, the same with any product. Increasing the minimum wage sets the selling point higher no matter the employees skill level.

The service industry will be hardest hit. Those business that are basically all labor and do not sell a product already have labor as their number one expense. Not only would service business see their largest expense increase they would also see an increase in matching FICA and Medicaid. Workers compensation is mostly based off of the amount of salary paid. Increase! Unemployment is based off of salary paid. Increase! And many service business insurance rates are based off of salary. Increase!
Let's face it there are a lot of services that would no longer exist if the price point became too high. People will clean their own home, stain their own deck, mow their own lawn.

But the argument that grinds me is that we believe we should be able to live comfortably and not have to work more than 40 hours in a week. How lazy are we? How self centered do you need to be to believe that you deserve a comfortable life for minimal work. Through out most of time people worked more than 40 hours to provide for their family. Many, like myself still do. Sixty hours a week can he normal for me. Sure I could work less but I would also make less money but I work my butt off to give my family a better life than the one I had. I NEVER thought it was the duty of my employer to make sure all my family's expenses were covered. That was my job and I would find a way to do it.

A high school student making $15 an hour on only working 20 hours a week is would be in the top 20% of wage earners in the world. When we fight for fifteen dollars a hour we are admitting we are lazy.

Take Edwardo. He worked in the main dinning room on our last cruise. He had been with the company for twenty one years. He left his family for seven months at a time working long hours just to give his family a better life. Seven months out at sea, two months home. He told us about how he had built a business back home and was employing people and now he would be able to retire from working on the cruise ship and stay home full time. This was a man who was willing to do whatever it took to provide for his family. He sacrificed so much and here we sit and claim... that you should be able to live comfortably and provide for a family on only 40 hours a week. 

Should everyone be able to make $15 a hour? Sure! I want everyone to make a lot of money and be rich. I want to be rich! But you need to learn a skill and work up the ladder. You don't get top dollar for entry level jobs. Nobody guaranteed me a basic level of income when I started my business. In fact worked below minimum wage for a very long time to build my business.  

If we ever raise the minimum wage that high, small business' like mine will most likely close. There goes six jobs times how many others that would do the same thing. Oh well, it really is my own fault, after all I just don't know how to run a business, or at least that's what they will say. 

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