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Monday, December 9, 2019

I’ve Got a Tip for You

Here we go again. Another round of minimum wage increases will soon be coming to Illinois. Or at least the Chicago area.

The city has set the new minimum wage to $15 by 2021. This will apply to youth, people with disabilities, and other groups that historically earn less money. The caveat in the legislation applies to restaurant servers and other tipped workers. These folk will continue to receive what is known as a “subminimum wage.”

The current minimum wage is $13 per hour. Businesses based in Chicago will see a progressive minimum wage rise to $14 an hour on July 1st, 2020. It goes up to $15 on July 1, 2021. If you are an employer with fewer than 20 workers, you are spared the employee cost increase until 2023. If your business has fewer than four employees, you are exempt.

Outside of Chicago, the minimum wage stays the same for four more years. But we’ll get there. This will pacify the protestors who have been pushing for this wage increase. For now. But only for now.

I’m not an economist. But I know a few good ones and have done plenty of interviews over the years. Enough to conclude that life will improve very little, if at all, for those who get the small hourly increases for which politicians trade votes.

Simple logic tells us that if a business incurs increased costs, something has to give. Or in this case, someone has to give. That would be the customer. Profits must remain intact or there is no point of being an employer.

Most minimum wage jobs are paid to low-skilled or entry level workers. Even a federal minimum wage has problems. Costs of living vary significantly from state to state. A number of companies who want to really help employees get a better life offer incentives to attend college or gain new skills.

Another reason why I don’t like government managed minimum wage is because it encourages automation. Replacing workers to reduce costs is a potential downside of unwieldy labor unions that demand benefit packages out of reach for many employers. It makes the cost of producing goods higher and less competitive.

The interesting twist in this latest round of increases is in the restaurant trade. Th mayor of Chicago is setting the subminimum wage for workers who receive tips to $8.40 an hour on July 1st of next year. They currently receive $6.40. The tipped wage will be set at 60% of the minimum wage so it rises as well.

This gets really messy. At present, an employer is legally required to make up the difference if an employee’s tips don’t add up to the regular minimum wage. Some workers claim that bad record keeping and other dishonest practices often keep this from happening. So what’s nest? The tip police?

And only certain restaurant workers are impacted. Fast food employees get only the minimum wage. Higher service restaurant workers get tips—some of which can make for a pretty decent living. Great service deserves recognition!

At the end of the day, the cost of living will likely outpace the gradual minimum wage increases. The paychecks earned will require a supportive living environment because American life does not function well on minimum wage. But it is a start for many. Years ago, I interviewed Dave Thomas, the creator and former CEO of Wendy’s. He started out as a “hamburger flipper.” There are all kinds of similar stories. It’s part of what makes America a great country. Opportunity still exists.

Hobby Lobby puts its mission statement this way: “We are committed to: Honoring the Lord in all we do by operating the company in a manner consistent with Biblical principles.”

With God looking over your shoulder, best take good care of those employees in your charge. God keeps good records.

That’s Forward Thinking. Click on the link to the right to connect via Facebook.

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