Today, 80 million Americans over the age of 16 are paid an hourly wage, and just 700,000 of these workers earn the federal minimum wage of $7.25 per hour. Despite most Americans earning market rates and many companies, including retail, boosting their starting salaries, there are movements across the country to increase the government-mandated minimum wage, or “living wage.” But is it necessary?
Starting June 4, a “hospitality professional” at a Sacramento Chick-Fil-A franchise will earn $17 or $18 an hour. It is unclear what the position entails, but new or current employees who nab the job can make far more than the $12.50 present workers bring home.
The latest policy will be $2 or $3 more than California’s 2022 goal of raising the minimum wage to $15.
The location also made a few other changes: leadership level employees will receive paid time off and all employees will be given paid sick leave.
Eric Mason, owner and operator of the store, says he wants to offer his staff a livable wage to help them “raise families, improve their lifestyle.” He concedes that it will be difficult, but Mason believes “people who are looking for a long-term opportunity” can make it a successful business model.
Considering that Chick-Fil-A generates more revenue per store than any other fast-food outfit in the nation, even when it’s closed one day of the week, Mason may make the lofty goal a success.
But that is the difference between voluntarily experimenting with higher wage rates and having the government intervene and tell businesses what to pay employees. Mason is using his own money and business acumen to pay staffers more than what the government says and perhaps even what the market would bear.
And it isn’t just Chick-Fil-A that is testing out this theory. Many businesses – large and small – have been increasing their minimum wages over the last couple of years. The results have been mixed, but that’s what occurs in risky entrepreneurial endeavors, whether you’re Walmart or a mom-and-pop shop.
Businesses Raising Their Minimum Wage
Soon after President Donald Trump and the Republicans lowered the corporate tax rate from 35% to 21%, companies responded favorably, and many of them passed the savings onto their workforces and customers.
Walmart CEO Doug McMillon announced that it would hike the minimum wage to $11, give out bonus checks of $1,000, and revamp its benefits program. Now they offer longer maternity leave and financial assistance for families wanting to adopt children.
Walmart wasn’t the only giant to embrace this type of payment structure. Capital One, Fifth Third Bancorp, Chipotle, Charter Communications, Wells Fargo, and a lot of others all confirmed they are raising their minimum wages to $15.
Over the years, smaller brands have attempted to integrate their personal progressive views to their enterprise affairs, leading to a disappointing outcome.
For example, in October 2017, Dudley Dough, a Boston-based pizza shop owned by non-profit Haley House, closed its doors shortly after paying its staff $15 an hour. Despite national media attention, praise from numerous Fight for $15 groups, and a $100,000 donation from the New England Patriots, the pizza store failed.
Luther Pinckney, a team leader at Dudley Dough, told local media at the time:
“I don’t think anyone is looking at it as a failure. It’s an experiment, and some very good things came out of that, such as skill-building for staff and being in this building at this time of gentrification and change in this community.”
It should be noted that three other pizza parlors launched at around the same time as Dudley Dough in the neighborhood and they are still thriving.
Free to Try
In the service sector, profit margins are thin, ranging from 2% to 6%. Labor is, of course, the biggest cost for any business that sells burgers, burritos, or bananas. In addition to that, the average proprietor needs to contend with energy costs, taxes, regulatory compliance, essential components for operations, and much more.
This is why a great number of small- to medium-sized businesses fear a so-called living wage. They can’t afford even a 1% jump in operating costs. Retail giants like Amazon or Starbucks can absorb the hike, but the typical Johnny’s Jelly or Jane’s Juice does not have that same luxury – just look at Ontario!
Plus, there’s a myriad of unintended consequences that happen after the state forces businesses to pay a certain wage that is higher than the normal working rate.
In the free enterprise system, you have the freedom to try, the freedom to succeed, and, most importantly, the freedom to fail. Whether you are a multi-national conglomerate or a minuscule street corner store, you should have the right to do whatever you want with your business, as long as you don’t violate the non-aggression principle (NAP). And this includes what you pay your workers – it mustn’t be that bad since the average hourly wage in America ($27) is more than the federal or state minimum wage.
It’s akin to what legendary economist Milton Friedman said, “A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.”
What do you think of a Chick-Fil-A store paying staff $17? Let us know in the comments section!