Commentary: Will Mandating a $15/Hour Wage Benefit Vermont?

By John Goodrich

The legislature is working toward mandating a universal $15/hour minimum wage. I have been in a position to see the real effects of such a step.

For many years I led a major St. Johnsbury manufacturing firm with as many as 300+ employees and as interim CEO at a St. Albans plant of 160 employees.  Proudly, we paid attractive wages, plus benefits, to promote strong work forces at both sites. From my experience I can testify that the desired outcomes of a mandated minimum wage would be perversely harmful to those needing a job and a wage.

The business owners and entrepreneurs constantly must judge what pay rates will attract workers with potential, consistent with business risk and competitive sustainability.  Those eager to impose an arbitrary $15 minimum wage are not collectively qualified to apply such judgments to the many and varied businesses throughout our state. The backers of the $15/hr minimum wage extol the benefit granted to those whose pay will be raised by the law and may sincerely believe they are doing low-skilled wage earners a favor by politically increasing their paychecks to above-market levels.  All too often, though, backers ignore the question: what good and what harm will come of it?

If the bill passes, there will actually be two minimum wages:  $15/hr for those who the firm can afford to keep at the higher rate, and $0 for those who lose their jobs or are never hired. Many will not receive the raise and no longer work at all because their job did not deliver $15/hr worth of value to the business.  The job is lost.  Legislation advocates give little heed to the owner of a business or the entrepreneur who must make ends meet.  Owners constantly consider the competition and the pricing of their products.  An owner may elect not to hire someone at the mandated wage rate because it will cripple the business’s position against their competitors outside Vermont, thus reducing profits essential for needed investment and growth. The added payroll cost, priced into the product, could render the business non-competitive and unsustainable.

My first job with a paycheck was in a grocery store in Littleton, NH at age 16, in the mid-1960s.  It paid $0.90/hr. I knew it was not yielding a fat paycheck.  However, the values that jobs like that taught teens like me were invaluable life lessons. We learned that conscientiously doing a job, acquiring more skills and experience, and climbing up the ladder would lead to increasing incomes. I would not trade a minute of those experiences that taught me habits and principles that favored me throughout my working life. If the New Hampshire minimum wage in those days had been say $3.00, I almost surely would not have had the opportunity to profit so richly from those lessons.

Like me in the 1960s, today’s teens are tomorrow’s work force and business creators.  In each competitive marketplace a company must make a profit to exist and survive. Those entry positions rarely provide value enough to justify $15/hr.  The digital age has transformed the workplace in many ways, but basic skills remain indispensable.  Those skills include: literacy, showing up on time, ready to work; meeting the expectations of job performance; completing assignments cheerfully and on schedule; pitching in when the chips are down; welcoming and helping the customers who make the job possible; learning to give just a bit more than expected; and being loyal to the business.  Akin to riding a bike, training wheels are first needed, and the skill to ride without those wheels takes time to develop.  Entry level people must similarly acquire the experience, work habits, and results that make them more valuable to the company.

The legislation threatens to drive out of business the small shops and restaurants that cannot survive political manipulation of their costs.  Their disappearance will destroy many entry level opportunities. A foundational building block of our nation is the liberty we have to pursue happiness. When the government imposes costly mandates like an artificial minimum wage, both the small business and people seeking jobs lose out. Politically mandated wages may benefit some employees, but the mandate harms many, especially the young recruits eager to prove themselves worthy of increased trust and opportunity. Perhaps some wage earners will advance to the $15/hr level, but the price paid in lost opportunity for the “newbies” starting out will lead to a weaker, not stronger, economy and society.

–  John Goodrich is the retired Site Manager and CEO of two large Vermont plants. He lives in St. Johnsbury, and is a director of the Ethan Allen Institute.

 

{ 4 comments… read them below or add one }

Dan Cunningham May 1, 2019 at 11:15 am

This is well written. Hopefully our legislators at least consider these points based on the quality of the argument here.

In particular the idea that two minimum wages always exist, the one set by the state and the one that remains at zero.

Reply

Frederick Bashara May 1, 2019 at 4:46 pm

The only entity that will really benefit from a higher minimum wage are our governments, Federal and State, as it will put them in a higher wage bracket. Everyone, including the new wage earner will be paying more for everything. Food, rent, electricity, fuel, etc. Asking a $15.00 minimum wage for those not receiving it now, will force every employer to raise the wages of all of their other workers. Everything will sky rocket and continue to force more of our elderly and young work force to continue to leave our state. We are quickly becoming a state of entitlements.

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Deanne May 4, 2019 at 1:36 am

I agree with both the above comments. A well-written article and good points in the comments.

I call a government-mandated minimum wage “legislated inflation.”

My first jobs paid 50 cents per hour in the early 80’s. In my early 20’s (early 90’s), while working a full time job at the minimum wage of about $4.75/hour, I also babysat evenings/nights for two adorable little kids at $2/hour. At about 25, I babysat for a different family at $4/hour. Many others have a similar history. Artificially/legislatively increasing the minimum wage means that I would have had to work 30 hours at my first jobs (50 cents/hour) to pay for one hour of service now. Or 7 1/2 hours for one hour now, at my earlier babysitting job. So much for people who bothered to save money in those days. They would have been better off buying something before the purchasing power had gone down the drain.

I honestly don’t know how people can really think that prices businesses charge will not rise to meet the expenses they have. Hello… Are these people thinking this through?

Also, if I had worked at a company for, say five years and worked my way up to $15/hour through hard work and commitment, I would not expect to stay at $15 if the new hires were getting $15. It would only be right for me to receive pay commensurate with my experience, and staying at the same rate as the new hires would be an insult. Not many people are mentioning this, yet it would cause a significant amount of added expense for employers, and necessitate increasing prices even more.

This is a perfect case of “what is seen and what is not seen.” Sometimes I think my head will burst with all the unthinking going on in Montpelier and across our country.

Reply

bruce buxton May 5, 2019 at 8:06 am

Well said, and a useful corrective to the bandwagon enthusiasm for increased minimum wages mandated by legislators and bien pensants with no experience of running a business.

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