“Compassionate” minimum wage laws


Paul liked owning his own business. He has big plans. The idea is to build his Burger King franchise into a solid profitable business over the next few years and then expand to two and then three restaurants down the road. Paul knows the key to successfully reaching this goal was to have a quality trustworthy manager to run the day to day operations efficiently. Paul was very pleased when he found this man in his first hire, an Indian man in his mid 40s named Das.

Das is a pro at setting the employee schedule so as to make sure there are enough people to handle the meal time rushes while staggering their hours so the restaurant doesn’t have excess payroll expenses during the slow mid morning and mid afternoon periods. Das has two assistant managers he calls his anchors. Patricia works from 7 am to 3 pm while Henry’s normal hours are from 11 am to 7 pm. By setting their hours in this fashion Das is able have one of his anchors at the breakfast and dinner rushes and both of them there for the all important lunch time rush. The restaurant is located near several corporate offices and as a result always does well during lunch. In fact most of the total business occurs between noon and 2 pm.

With his anchors in place who can handle everything from running the register to preparing the food, Das makes sure they each have enough support staff specializing in different aspects of the restaurant’s needs. There is for example Alberto who speaks little English so only works in the kitchen. He is fast and efficient and can cover 2 stations by himself better than any 2 of his fellow employees can separately. Alberto takes care of all the burger and sandwich preparation for the rush hour. As a result of his importance, Alberto, at $10 per hour, is paid more than any other employees except for the managers. Several employees will only work the register and several others are only proficient at specific tasks in the back such as unloading the delivery trucks into the appropriate places in the walk-in fridge and freezers. There are others that work the breakfast shift but are flexible enough to work a few extra hours in the back on the busy days helping out with the fry station or whatever else needs to be done. All in it is somewhat of an art to make sure Das has just the right employees working during the right times.

Paul spent a good deal of time with Das when he first started to help him understand the importance of running things efficiently. It turns out that just about every other expense the restaurant incurs is either a fixed cost such as rent and insurance, or is a per unit cost like the burger meat and buns etc. Labor is the only thing that can be adjusted without immediately affecting revenue to ensure the company makes money. After all if the business loses money everyone there will be out of work.

A few months ago Das approached Paul about the possibility of hiring his elderly father Singh who lives with him. Singh walks very slowly and is hard of hearing. On top of that he speaks very little English. After some thought on the matter, Paul agreed to hire him to help clean up the dining room after the lunch rush. Paul could only afford to pay him minimum wage and just for the few hours a day during and after lunch. Das was very happy with this arrangement. It allowed his father to stay active and he could take pride in contributing some money, albeit a minor amount to help cover his expenses.

Things worked out under this arrangement until word came that the government had raised the minimum wage from $5.15 per hour to $7.25 per hour. At first there was a buzz around the restaurant as the 7 employees who were currently getting minimum wage anticipated their raises. Additionally there were 9 more employees currently making more than $5.15 per hour but less than the new minimum wage of $7.25 per hour. All of the 17 non managers except for Alberto out of the 20 employees were slated to get raises.

Paul looked carefully at his monthly business statements and calculated them again with the new higher wage rates. Just as he had anticipated, the higher wages would cut out most of Paul’s income. He simply wasn’t making enough of a profit margin to justify having 20 employees at the higher wage. Unfortunately Paul had to fire Singh and 4 other part time workers. The dining room would be cleaned less frequently and Paul arranged to have the food deliveries during the morning so his workers could unload the truck at the same time they were prepping for the day.

Das tried to explain to his father that the law now made it illegal for them to keep him employed at anything less than $7.25 per hour. His father was crushed. He pleaded with Das to let him come back to work. He was old and tired and just didn’t understand why it was anyone’s business what wage rate he agreed to. He would gladly take $4.00 an hour just to get back to work and feel useful again, but it wasn’t to be.

1 comment:

  1. I always ask liberals a simple question when it comes to the fallacy of a living wage. Would you rather that young kid in the projects have a job sweeping the floor at the local bodega for 5 bucks an hour, OR sitting around on his stoop being surrounded by other poor youths who can't get a low paying job? They don't seem to get the fact that, like this story you present, businesses lose the incentive or ability to create low paying jobs when they have been "priced" out of doing so.

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