June 12, 2015
The Wall Street Journal ran a piece headlined, “as minimum wages rise, small firms get squeezed.” Most readers probably would expect a story of how small businesses are being hit by higher minimum wages. But the business that provides the framing for the story doesn’t seem to fit the bill at all:
“Hannah Joseph dreams of bringing gourmet grilled hot dogs to food lovers coast to coast. But she now rules out owning any new restaurants beyond the two she and her husband currently operate in Indianapolis.
“The reason: high staffing costs, and growing competition for low-wage workers.
“‘I don’t want to deal with more employees,’ said Ms. Joseph, co-owner of King David Dogs, whose 10 or so staffers start at $7.50 an hour, 25 cents above the federal minimum.”
As the piece notes, the minimum wage in Indiana is just the federal minimum of $7.25 an hour and has not been raised in six years. The restaurant apparently is not bound by the minimum, since it is already paying 25 cents an hour more than the minimum, presumably to attract and retain workers.
Insofar as Hannah Joseph is being forced to scale back her plans it seems likely that it is mostly the result of a poorly conceived business strategy. She apparently underestimated the cost of labor and presumably other expenses. That likely would have been the case even if no one was raising the minimum wage, unless the Fed threw the economy back into a recession with high interest rates.
Comments