With the District of Columbia’s new $15 an hour minimum wage law slated to go into effect over the next four years, many local businesses are still figuring out how they can pay workers more and remain profitable.
On the one hand, many local business owners think that an employee working full time should be able to earn a higher wage than the current D.C. minimum wage. On the other, some worry the additional labor costs will place serious stress on their businesses, forcing them to cut employee hours, raise prices, or even close up shop.
Liz Winchell, who employs 12 at Cleveland Park paint-your-own-pottery shop All Fired Up, painted a grim picture of the future of modest small businesses in D.C.
“Minimum wage was never meant to be a means of living full time, all the time,” Winchell told The Daily Signal. “When you look at a small business where the margins are really narrow and really small, the numbers don’t add up. And there’s no way to stay in business when minimum wage is going up the way it is.”
“I know small businesses have already started closing,” she added, “and small businesses will be changing their store hours; it’s just a fact. It’s inevitable.”
“I support people making a living wage, but of course we’re going to raise our prices—the numbers have to make sense, or we’ll close,” says a D.C. consignment shop owner.
The speed of recent minimum wage increases has made them particularly tricky for startups and businesses with low profit margins to navigate. The previous increase for the District of Columbia, which went into effect in July 2014, incrementally raised the minimum wage from $8.25 an hour to $11.50 an hour by 2016. (The recent increase to $15 an hour will be fully implemented by 2020.)
“All I know is that when I was working on my business plan, I knew what the cost was and I did not anticipate it growing from that to this within such a short period of time,” Carolina Story, who co-owns the Straw Stick & Brick Delicatessen, told The Daily Signal in June. “It completely changes the business plan.”
Other business owners expressed a similar sentiment.
“I support people making a living wage, but of course we’re going to raise our prices—the numbers have to make sense, or we’ll close,” said the owner of a District consignment shop who asked not be named because, she laughed, “people come in here looking for a bargain.”
“All my workers are part time, so we might have to cut hours as well.”
But not all owners were pessimistic about the possibility of balancing the higher overhead costs with a pay cut.
Debbie Danielson, who owns the popular Eastern Market boutique Forecast, is adamant in her support for the $15 minimum wage.
“I’ve been in business since 1978, and I would never have ever deigned to have paid someone minimum wage,” she said. “It would always have to be considerably higher, because I know what it costs to live. So I don’t make quite as much money—oh well.”
“I don’t think people should be working full time and not be able to have a decent life,” she added.
The D.C. Chamber of Commerce, which has supported minimum wage increases in the past, has also expressed concern about the swiftness of the latest plan.
The chamber’s interim president and CEO, Margaret Singleton, testified before the D.C. Council’s Committee on Business, Consumer, and Regulatory Affairs in May:
The proposed legislation, as did the last minimum wage increase law, will increase the cost of housing, food, and consumer products. Equally likely, employers would reduce fringe benefits and restructure their workforces or reduce future hiring because, after all, a minimum wage increase is a tax on employers that must be addressed in overhead and/or the product. That tax is ultimately passed onto the consumer, and the data supports these projections.
Similar battles over a $15 minimum wage are raging across the country, with Sen. Bernie Sanders, I-Vt., introducing the Pay Workers a Living Wage Act last year.
A report by James Sherk, a research fellow in labor economics at The Heritage Foundation, shows the dramatic effects that raising the minimum wage to $15 an hour nationwide would have on the economy, ratcheting up wages for a third of the entire workforce in one fell swoop.
According to the report, a federal wage increase would have a “greater effect” in areas with cheaper living costs, because “those wages purchase more goods and services than they would in high-cost areas.”
But even in the high-cost District, Sherk told The Daily Signal, the increase was likely to eliminate 11,000 jobs.