THE GLOBAL PANDEMIC and subsequent recession have brought many companies to the brink. At the same time, the fortunes of the 1 percent continue to rise, widening the racial and gender wealth gaps. Depending on which side of the issue you’re on, it’s either the most crucial or the most fraught moment ever to address a long-simmering debate: What’s a livable wage? And how responsible are employers for paying one? The current federal minimum wage of $7.25 an hour hasn’t budged since 2009–the longest the U.S. has delayed an increase since the inception of the minimum wage in 1938. And while a hotly contested $15 national wage did not wind up in the latest stimulus package, the issue isn’t going away; President Biden will likely pursue it later in his term. Below, some of the smartest leaders, founders, and labor experts we know weigh in on the pros and cons of pushing the federal minimum wage up to $15. –As told to Tom Foster and Kimberly Weisul
Owner, Dallas Mavericks; co-star, Shark Tank
I am all for an indexed $15 minimum wage for those 18 and older. Locations with a lower cost of living would get some amount less, and more expensive locations would get more. Three or four years ago, I went through the Mavs organization and the arena that we operate and asked who made less than $15. For those who did, we put them on a program that got them there. We will continue to increase as we go forward. If we don’t pay a living wage, then the people who work for me become dependent on government programs. That means that taxpayers would be subsidizing the costs of my companies. That is not just embarrassing–it’s also the worst form of socialism.
Professor, department of economics, Texas A&M University
The minimum wage is really weird from a philosophical perspective. The employer has given this person a job. Let’s take it as a given that they are dealing with the person fairly. Why is it the employer’s responsibility to ensure the overall well-being of the employee’s household? That is a shared responsibility, and we should be using the tax and transfer system to fulfill it. We should let the labor market do what it’s going to do, and then assure people of a basic standard of living using employment subsidies and income support programs.
Founder and CEO, Outer Aisle
I don’t think a federal mandate is helpful for small businesses, the engine of our economy. I think the minimum wage should be set statewide, as it currently is, because you have such a broad range of people and economies in the different states. Our home state of California has one of the highest minimums, so I’m not saying this for my own benefit. It’s not going to impact us at all, because we already pay above what’s required. And the reason we do that is because capitalism works: If an employee is working for you and they can’t manage their life and pay their bills, they’re not going to keep working for you. When we first started, we paid minimum wage for work in our production facility, and we saw turnover. Many employees were picking fruits and vegetables outside before they came to us. We just kept raising our minimum until we got to a point where we established kind of a stay wage, where we could keep good employees. We do a 90-day trial period at $14.50, and then we bump them up to $17. We continue to train them and move them up as they stay with us and improve their skills.
Senior economist and director of policy, Economic Policy Institute; former chief economist, U.S. Department of Labor
Fifteen dollars an hour is an appropriate level for the minimum wage right now. We’re not going to suddenly go to $15 during the pandemic. The increase will gradually be phased in. Given inflation expectations over the next four years, $15 in 2025 would be about $13.79 in today’s dollars.
When people picture paying a higher minimum wage, they see it as if they were the only business raising wages. That is the beauty of an across-the-board labor standard. Everyone will need to raise wages, so no business will be at a competitive disadvantage.
After adjusting for inflation, the minimum wage is 31.5 percent less than it was in 1968. During that time, productivity growth has more than doubled. So, as an economy, we can afford this.
JAY B SAUCEDA
Founder and CEO, Sauceda Industries
The idea that we need to protect low-level jobs from automation–that’s holding us back. I say that as a man of the blue collar. That’s who I am. If our government could pour money into education rather than having to support the underpaid, we could build an incredible workforce that’s smarter, faster, and stronger than any other in the world.
Professor emeritus, Michigan State University’s School of Human Resources and Labor Relations
When minimum wage goes up, business owners don’t typically lay off workers. Instead, they increase prices modestly. Because everyone is affected, consumers can’t escape the increase by going somewhere else. Most people working at minimum wage are low-income. A higher minimum wage allows them to work fewer hours–maybe one job instead of two. This reduces turnover. If labor is more expensive, use it more efficiently.
Associate professor of economics, John Jay College, City University of New York
I don’t necessarily think or believe a minimum wage increase results in job loss. Business owners want customers to buy their products, but if you’re part of the working poor, you may not be able to afford those products. Wouldn’t business owners want consumers to be able to afford their products?
Mayor, Emeryville, California
We did one comprehensive study in the year following our implementation of the highest citywide minimum in the nation in 2015. The overarching story: It was still good to do business in Emeryville. One reason we haven’t seen a big impact on restaurants and businesses that employ many low-wage earners is that other cities around us were already on a trajectory to get to $15 an hour, or did so after we raised our minimum. The idea that jobs would move to other cities was something we needed to consider. It worked in our favor when everyone decided to jump into the fight for $15. I think we saw some go out of business or leave in the very beginning. But it’s almost impossible to tease out business closures based solely on minimum wage. The closures from the year we raised our minimum looked like any other year.
Founder, P. Terry’s Burger Stand
Our relationship with our employees is different from that of most fast-food companies. That relationship led to the $15 minimum wage [up from $12 an hour] we enacted on January 1. We took a really serious approach. How much of this do we put on the backs of our customers? How much on the back of our business? It wasn’t that hard. I’m a little embarrassed how easy it was. We increased our prices 2 percent, which means a dime on a burger, a nickel on fries, a dime on a shake. Nobody noticed. That move covered about half of the cost. The company’s bottom line took the hit to make up the difference. A lot of our employees got $5,000 more a year because of our wage increase. It changed their lives. There is no doubt that this is better for our business. The quality of employees coming in rose. Our sales are increasing as a result. Our product comes out better. And I get to sleep better at night.
By paying employees or contractors a non-livable wage, we communicate much more than “I’m working on a tight budget.” We make people feel like they don’t matter, and we don’t value their time or work. Not only is that a terrible message, but it also typically results in poor performance and poor-quality work, which harms our businesses or at least prevents us from reaching our potential. When we invest in our team, we invest in ourselves, and this minimum wage increase helps us all to begin from a place of greater respect.
Co-founder and CMO, Sales Lead Store
I’m for raising the federal minimum wage to $15 an hour. I also see this as an equity issue. Women and people of color are disproportionately affected. When people think about equity in the workplace, they tend to think about sensitivity training and what pronouns to use and creating new pipelines for hiring historically disadvantaged people. That’s all important and useful, but not nearly as effective as just paying people equally. This is America, and in the weird love language of America, money means everything.
Principal, Real Tacos and 210 Ceviche restaurants
I’m thinking, what areas of our business could we automate? Larger restaurant groups have more flexibility. The operators that had fast drive-throughs and good mobile applications weathered the pandemic a lot better than the ones that did not. The smaller players had to scramble to keep up. The same forces will play out with a wage increase.
Founder and CEO, Gravity Payments
Raising the minimum wage will squeeze a lot of small businesses hard. But we can genuinely fix that with our tax code. Rather than subsidize so many large companies, the government can instead give tax credits to small businesses for the difference in the minimum wage. We can afford to let small businesses ramp up a little bit more slowly. Five years ago, when we doubled pay at the bottom of our pay scale at Gravity Payments and flattened out the top, our employee attrition was cut in half. Employee turnover costs something like six months’ pay. So if you can cut turnover, you can increase pay and it doesn’t cost you anything. We’ve proved that at Gravity: Workers will come through for you, and a wage increase will pay for itself.
Founder and CEO, Virtudesk, which employs more than 300 people in the Philippines
If the federal minimum wage goes up, it’ll help my virtual assistant firm because more business owners will just have to outsource–but that’s not going to help the American economy.
The impact of increasing the minimum wage would be significant–and not in a positive way. My company has a razor-thin profit margin. You can raise prices and cut back on labor, but neither of those is going to be good for business. When this happened in California to my parents’ business, they had to lay off a handful of people. Ultimately, the situation motivated them to move to Missouri. With a blanket, countrywide increase, there won’t be another state you can escape to.
Founder and CEO, Cheekys
We are a rural business, and I’m always firing someone’s sister or writing up their kid. And we are in Idaho, one of the states with the lowest wages at $7.25. We’re also seven miles away from Oregon, where the minimum wage is more than $11–so people can drive a few minutes and make way more money. We’re not able to utilize the minimum wage for the average adult worker. The difference for us is young workers, high school students who can help us with low-skill labor and learn all the ins and outs that come with your first teenage job. I won’t be able to give that to my community with a minimum wage at $15. I can’t justify that.
From the May/June 2021 issue of Inc. Magazine