What A $15 Minimum Wage Means For Your Business Model
If you’ve been paying attention to national news, you’ve likely heard conversations about minimum wage. Some support raising the minimum wage, while others are vehemently against it.
The most recent push to raise the minimum wage to $15 per hour was quashed.
But with private businesses agreeing to raise their minimum wage to $15 per hour, that doesn’t matter. Much like the green vortex that’s driven US carbon emissions below what any proposed (and quashed) bills would have required, many businesses are taking the initiative to raise their minimum wage without government regulation.
Costco, Amazon, Chipotle, Target, Best Buy, and Wal-Mart—all private businesses—have agreed to raise their minimum wage to $15 per hour
At Nexus PMG, we exceed $15 per hour for all positions, including entry-level positions.
States and cities are also on the raise the minimum wage bandwagon. California, Illinois, and Massachusetts are all set to raise their minimum wages to $15 per hour by January 1, 2023. Dallas will only do business with contractors who pay employees at least $15 per hour.
Which begs the question:
What will you do when employees will no longer work for the wages you offer?
The answer is simple. You will have to raise their pay.
So, what does this mean for your business model? Let’s use the restaurant industry as an example.
The average labor cost for a financially sustainable restaurant is 30-35% of gross sales, with 20% going to pay wage-earning staff such as servers and line cooks, and an additional 10-15% percent going to pay salaried workers such as managers.
Let’s say that your business model is based on paying hourly employees $7.50 per hour. In order to compete with the Chipotle down the road, you now have to double that to $15 per hour.
How will you fill the gap?
Yes, you can pass on some of the expenses to your customers. But how much will they tolerate, especially in a recovering economy?
The solution may not be simple. It may require incremental shifts, which is why the time to take action is now.
Now, while you have the luxury and advantage of time on your side, is the opportunity to re-evaluate your business model based on the trend of rising wages.
If you’re thinking that this won’t affect you and you’ll be able to maintain the status quo, perhaps you’re right. But is that a risk you’re willing to take?