Small Business Owner Explains Options: "Close, Hike Prices, Or Eliminate Jobs"

The mad dash to increase the minimum wage continues. Earlier we reported that New York and California had passed legislation that would raise the minimum wage to $15, and in June the District of Columbia also voted unanimously to raise the minimum wage to $15 as well.

 

In a statement sent to The Daily Signal, D.C. Council Chairman Phil Mendelson said the following:

The District can be an expensive place to live and therefore the concern about the minimum wage is more acute than would be the case is other areas of the country. I expect that the District will not be alone in the Washington metropolitan region, as similar legislation is pending in populous Montgomery County, Maryland.

One small business owner is not so thrilled about the announcement however. Carolina Story, co-owner of Straw Stick & Brick Delicatessen in northwest Washington said she is in shock about the minimum wage hike. "It puts a big stop on little startups like ours" Story said.

As The Daily Signal reports, Story took to Facebook in order to rant a bit about what the hike means to small business, especially Straw Stick & Brick. Story quickly added up the additional labor costs that the deli would would be forced to deal with as it struggles to stay profitable.

This means that a small business like mine—that needs to fill at least 11 entry level positions would have to pay those employees around $31,000 each per year which would amount to approximately $363,000 per year. Of course we would still need to fill at least [three] management positions which would obviously demand more than minimum wage—say maybe $40,000 per year on the low end (these positions deserve more pay but because of the entry level positions I am forced to be conservative).

 

That means that our yearly labor cost might rise to $483,000 in 2020. Business owners in my situation would need to make $1,932,000.00 per year in order to have a healthy business, pay ourselves a living wage, and cover fixed and variable costs.

Story went on to tell The Daily Signal that her original business plan now needs to be changed completely.

"All I know is that when I was working on my business plan, I knew what the cost was and I did not anticipate it growing from that to this within such a short period of time. It completely changes the business plan."

The deli, which has a staff of less than a dozen people, hires college and high school students to fill some positions and all current employees make above minimum wage. Story also hits upon the primary function of entry level jobs, which is to gain experience and move on - something that will go away as minimum wages continue to increase and small businesses can't afford to pay the labor cost.

"I have people who we hire to slice meat. They don't want to do that forever. They basically come in here so they can go on to their next step in life."

Story admits there isn't much she can do about it except to plan how to handle the coming wage hikes.

"I can't really do anything about it. All I can do as a business owner is work hard to figure out how to adjust. You have your small business owners who typically tend to work their butts off trying to be able to make their business work and grow it. But the reason I don't take a paycheck is because I'm reinvesting in this business to be able to grow it a little faster without taking loans."

Carolina concluded that there are really only three options for small business as minimum wage continues to be increased.

"Small business will either close, hike up their prices in hopes that the consumer understands, or consolidate positions and eliminate jobs. D.C. I love you - but boy oh boy are you making a big mistake!"

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These types of warnings from small business owners will of course be ignored by the elites who wish to plan the entire economy, even if "economically, minimum wages may not make sense." The unintended consequences of these minimum wage hikes will be for some small businesses to shut down entirely, and for larger operations, mass layoffs and significant cuts to hours, just as WalMart and Starbucks have shown.