John Goodrich: Vermont businesses cannot support a higher minimum wage
Editor’s note: This commentary is by John Goodrich of St. Johnsbury. He is a retired site manager and CEO of two large Vermont plants and a director of the Ethan Allen Institute.
The Legislature is working toward mandating a universal $15-per-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 over 300 employees, and I was interim CEO at a St. Albans plant of 160 employees. Proudly, we paid attractive wages, plus benefits, to promote strong workforces at both sites. From my experience, I can testify 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-per-hour 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 per hour 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-per-hour 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 noncompetitive and unsustainable.
My first job with a paycheck was in a grocery store in Littleton, New Hampshire, at age 16 in the mid-1960s. It paid 90 cents per hour. I knew it was not yielding a fat paycheck. However, the values 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, 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 workforce 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 per hour. 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 per hour level, but the price paid in lost opportunity for the “newbies” starting out will lead to a weaker – not stronger – economy and society.