The Sand is Shifting! Small Business and an Increasing Minimum Wage

For small businesses, the influences that effect success or failure can at times feel limitless. Recently there have been a number of states that have moved towards increasing the minimum wage. While the opinions for and against an increase in minimum wage are impassioned, the reality for all businesses with minimum wage employees in these states is that this exogenous change will have a material impact on expenses. Whether this change ultimately affects total net cash flow or profitability will depend on a business’s willingness and ability to review current strategy and the effectiveness of the business’s execution, and adjust either if necessary. This is a public example of change that will have an impact on a large segment of our economy. I believe the reaction will also be played out in public. Many businesses accept that change is an inevitable aspect of business. These businesses are actively assessing market trends, tweaking execution…influencing their competitive situation whenever possible. As it relates to minimum wage, Costco is a great, recent example of a company that has accelerated the change that otherwise would have been forced on them, by increasing their entry level pay to $13-$13.50 an hour. In doing so, Costco is positioning itself favorably in the race for increasingly hard to find talent, and further supporting an environment that is frequently recognized by employees as one of the best large retailers to work for. With smaller businesses, and specifically those that are averse to change, external events like an increase in minimum wage are inevitably harder to absorb. Fortunately, in states like Oregon, whose new law goes into effect in 2022, there is time to make the necessary strategic changes to respond to the minimum wage increase. For businesses that employ a significant number of employees that will be affected by the new law, eventual survival might require it. For Portland small businesses in particular, the increase is 60% greater than today’s minimum -wage, meaning the 2022 increase translates to a fully-burdened $13-15,000/year/full-time employee impact to profitability. I’m interested in all constructive thoughts on the topic, so please share or comment. For a confidential conversation on strategic planning for your business, please email me directly at kkrietemeyer@focalpointcoaching.com. This publication contains general information only and FocalPoint is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services.
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