I posted the other day about the effect of the new Florida minimum wage on prices. I spoke with my brother about it, and he actually gave me a few details about how he is going to deal with it.
My brother owns a retail sales company that has 30 employees. Since the new minimum wage is going to increase his labor costs, he is going to have to find a way to make the new numbers work. He can’t raise prices very much, because his competition will slaughter him if he does.
So he has to cut costs. He can’t cut the cost of inventory, those prices are what they are. he is already at a cost disadvantage because larger companies already buy product by the railcar and get quantity discounts that he cannot hope to match.
Here is what he came up with:
An employee currently is paid for 2,080 hours per year. A 16 percent raise is equivalent to 333 hours of work. That is equal to 42 days at 8 hours a day, or about 2 months of the work year.
Vacation, paid sick leave, and holidays mean that employees get paid for 180 hours per year when they are not working. That means that 9 percent of his labor cost is paying employees when they are not working. So, half of the first year’s raise is going to be made up by eliminating all paid time off- no sick leave, vacations, or holidays. If you aren’t at work, you aren’t getting paid. Now he isn’t a Scrooge- his employees will still get holidays off, they just won’t be getting paid.
Additionally, he will be implementing a quota system for productivity. Any employee who falls short of their quota will receive a warning. If they continue to fail to meet that quota, they will be terminated.
Liquidate, fire everyone, and retire.