Editor’s Note: This commentary is by Erin Sigrist, who is President of the Vermont Retail & Grocers Association.
[E]ach year, Vermont’s grocers and retailers hire hundreds of high school and college students for their first jobs. They train them to use a cash register, to show up for work on time and in clean clothes, to interact with customers in a polite and professional manner, to problem solve when a customer requests something that’s out of stock. Some of these employees stay for years, but most move on to other jobs, where their future employers get the benefit of a mature and responsible employee.
As businesses that rely heavily on young employees without previous job training, minimum wage increases hit Vermont’s retailers and grocers particularly hard. Most store owners already work seven days a week, alongside their employees, and carefully manage costs to remain sustainable. The proposed $15.00 wage currently in front of the Vermont Legislature would increase their labor costs by more than 50% over the next six years—on top of the 20% increase they have weathered the last four years from the 2014 increases.
But the difficulty placed on small businesses isn’t the only problem—or even the biggest one. Significant increases in the minimum wage simply don’t help the people that most need assistance.
What small businesses in Vermont say over and over again bears out in national research. A study by the National Bureau of Economic Research found that minimum wage increases actually harm those workers earning closest to the minimum wage. Why? Because although their wages increase, their hours and employment decline, leaving them with a lower overall income.
In fact, a study by the University of Washington showed that the City of Seattle’s minimum wage increase from $11 to $13 in 2015 actually decreased low-wage employees’ (those earning less than $19 per hour) earnings by $125 per month.
Increasing the minimum wage sounds like a good plan: if people aren’t making enough money, simply mandate that they get paid more. But that thinking ignores the realities of a small economy, as well as the uncertainty that comes from a proposed wage hike of this magnitude. No studies have been done to understand the effects of an increase this large, which would impact more than 25% of Vermont’s workforce.
A Legislator recently compared Vermont’s economy to a group of buckets filled with water. Whenever we add new programs or increase costs on one group, we’re simply moving water from this bucket to that. There’s no new water coming in.
It’s an appropriate metaphor. Our small businesses—especially our grocers and retailers—can’t sustain constant increases. Eventually, there is simply no more water in their bucket. Faced with a mandate to increase wages while still having to make payroll, they have no choice but to cut costs elsewhere, either by laying off employees, reducing hours, or removing benefits. Some may be forced to shut their doors. The result isn’t good for anyone.
Four years ago, legislators, business leaders, and employee advocates agreed on a minimum wage increase. The resulting bill included annual growth until 2018, at which point the minimum wage would be tied to the Consumer Price Index, a measurement provided by the U.S. Department of Labor that indicates changes in the pricing of goods and services. Those initial increases were a challenge for some companies, but its current tie to the CPI now provides a level of certainty for Vermont’s small businesses.
Changing the minimum wage this year would negate the hard work that was done to find a solution that would not only serve Vermont into the future but also allow state government to spend its resources identifying effective ways to help those who most need assistance.
We need solutions that provide vulnerable populations with the things that will actually move them forward—things like better training, affordable childcare, and a way through the benefits cliff. Solving these problems will require our Legislators to see Vermont’s small businesses as critical partners in a mission to raise up our whole state—because retailers and grocers aren’t just providing jobs to young Vermonters. They’re laying the foundation for the next generation of Vermont’s workforce.
