Ready Or Not Here Comes A Higher Minimum Wage

There is much wringing of hands in the business world about a rise in the minimum wage. The rhetoric has become heated, if not hysterical, in many business publications and blogs. Even among so-called serious people, the arguments drift into the hyperbole of Ghostbusters. Fire and brimstone coming down from the skies! Rivers and seas boiling! The dead rising from the grave! Human sacrifice, dogs and cats living together -- mass hysteria!

Could an increase in minimum wage really cause that kind of havoc? I suspect not. The great wheels of capitalism, I'm pretty sure, will not come to a screeching halt with a significant jump in the wage. Dogs and cats will not start living together. In fact, I'd like to offer a more sanguine view of what may happen and what could happen. Let me state up front, this isn't a prediction, but it's a potential strategy not much discussed.

For better or for worse, many minimum wage jobs are designed as "minimum wage jobs." They accommodate the reality of high personnel turnover with simple, standardized, repetitive tasks that are quickly and easily learned. Fast-food franchises are the best example of this accommodation. For years, the fast-food industry was known as a 100% turnover industry. Each year saw a complete change in personnel. In some years, the turnover was greater than 100%. That was true up until the recession, when turnover slowed.

To a less extreme degree, the same kind of thinking has been adopted by small businesses across the country. Low-paid employees need to be trained fast, because they don't last. And why should they stay? In many of these jobs an injury that results in disability payments is considered a good career move.

A higher minimum wage will likely improve retention with employees staying beyond a year, two years or even three years. If that becomes widespread, it would be transformative for many businesses struggling to deal with employee turnover. Not only will employees stay with a company longer and perform more efficiently, they would be capable of taking on more complex tasks as their understanding of the business improves over time.

This is a much-overlooked aspect of the minimum wage increase. Most of the debate has been focused on the bottom line. So at first glance things like lengthier employee retention and ancillary benefits like increased productivity appear less tangible, lacking immediate metrics. Even wage-increase advocates make the same kind of arguments that assume minimum wage job descriptions are somehow etched in stone.

This is simple stuff. If paying more for the same job seems distasteful, then change the job. To be perfectly business-like and pragmatic about it, job descriptions have always changed with an increase in salary.

Employee retention shifts additional burdens onto managers. Given a stable workforce capable of taking on more responsibility and more complex tasks, what is management going to do about it? They can either waste the potential locked inside the increased pay or figure out a way to run a company more efficiently.

Of course, some companies will adapt better than others. Fast-food franchises are probably in a bit of a pickle. With operations designed specifically for high turnover, it may take these businesses years to adapt to a new workforce. Conversely, small businesses capable of moving more quickly and nimbly will probably be the biggest beneficiaries of a potentially higher-value workforce.

No doubt some companies will simply cut workers and require the remaining employees to work harder without changing the job descriptions. Not only is this uninspired and short-sighted, it isn't a great choice if businesses become less efficient. The irony in all this is that how well a company adapts to higher-paid, low-level employees rests squarely with better-paid managers.

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