Editor’s note: This commentary is by Steve Moyer and Patrick Crowl of the Woodstock Farmers’ Market. Moyer, of Plymouth, is CFO and partner and Crowl, of Pomfret, is founder and principal partner.
[T]he state Legislature wants to expand the minimum wage to $15/hour by 2024. We feel, as operators of a small business, that a sudden increase like this would cripple the growth and general operations of our business and those of many throughout the state in five major ways.
• Fairness. Raising the minimum wage will mandate raising the wage of any worker we currently employ by roughly the same dollar figure ($10.50 to $15, or $4.50 more per hour). This is a matter of fairness — we wouldn’t expect a dedicated employee of five to 10 years to make the same as a new hire. Pretty much every employee would receive an increase of $4.50/hour. In other words staff making $17/hour now would need to move to over $20/hour.
• Prices Increases. Our business already pays well above the current minimum wage except for high school students who are working for the first time. In the last year, we had a little over 110,000 hours of payroll. For us, with an increase in the minimum wage of $4.50/hour, our payroll expenses would go up by about $450,000 in just six short years for that factor alone. Our net operating profit the past three tax years has been nowhere near enough to cover that type of expense increase, so to survive, we will have to implement some significant price increases and/or staff reductions to maintain a profitable entity.
• Reducing Benefits. A dramatic increase in minimum wage will dramatically alter the benefits we offer. We currently offer many benefits including a fully paid staff lunch, 2 percent match on Simple IRA accounts, 20 percent discount on all store purchases, gym membership contributions, and a significant contribution to health insurance premiums. We would need to consider paring back these programs to pay for the additional increase.
• Reducing Bonuses. We currently practice open book finance. As part of that we offer a gain share on the net operating profit of the business. Last year we shared $48,000 out of our total net operating profit of $178,000. We would need to consider paring this benefit back to help cover the added payroll expense. Additionally, we would need to re-evaluate how we can reduce the overall number of people we currently employ. More automation and thus less labor is a significant way to reduce expense. This type of action would be magnified across the state and may lead to fewer available jobs.
• Inflation Pressures. Don’t get me wrong. We do need to continue to raise the minimum wage here in Vermont. Placing more money in the pockets of our state’s overall economy is a big deal. Vermont has actually been very thoughtful about this issue up to this point. A more gradual process, mirroring the increase we have seen over the past five years from $8.50 to $10.50 per hour, would continue this line of thinking. A 23.5 percent increase of $2 per hour over five years is much more feasible than a 42.9 percent increase of $4.50 per hour over six years. But the decision to increase the minimum wage by $4.50/hour in such a short period of time will fuel inflation within the state. Every employer will have to raise prices to cover the added expense. It will trickle down to every sector of the economy.
Some background: The highest state minimum wage currently is $11.50 in Washington state. The metro area of Portland, Oregon, has plans to raise their minimum wage from $11.25 to $14.75 in the metro area by 2022, but only to $12.50 (from the current $10) for the surrounding rural counties. The cost of living in those rural counties is most likely comparable with the cost of living in Vermont, and the cost of living in the Portland metro area is certainly higher. Where is the logic behind the proposed increase to $15 for a rural state like Vermont?
It’s also very important to note that many small businesses like ourselves are stewards in our community. We support local organizations. We bring cutting-edge sustainability programs to our state. Particularly here at Woodstock Farmers’ Market, our BYOB bag program and our relationship with our community food shelves — all have higher purpose in mind. With the help of our customers, we have raised over $15,000 in the last 18 months to purchase fresh produce for our local food shelves. And like so many other small businesses, we are one of the major drivers of our local Woodstock economy (employing over 60 with gross sales over $8 million). We cherish our role of being a big part of local life: We feed our community. Not just in the literal sense.
Given the economics of this proposed legislation, for us, paring this philanthropy back would be a real probability.
We hope the Vermont Legislature takes a pause and reflects on the real rural Vermont economy and spends the time to work on economic modelling. Higher wages for all is a good thing. But when you boil it down, this bill, which moves to increase wages too quickly, puts an undue burden on the backs of small businesses. With an increase in minimum wage at this rate, many mom and pop businesses — from the food industry to the countless retailers of crafts, clothes and artisan products may cease to exist or be the economic leaders we currently are in our many small communities around the state.
