Getting High

In September, the National Retail Federation published the results of a survey that it had commissioned to determine the current sentiment among owners of small businesses. The data was collected about six months ago.

One of the questions they asked was about changes that the retailers expected to make in their own operations over the next year. Not surprisingly, the most common answer (36 percent) was that they planned to expand their store’s online presence.

That should have been their answer 10 years ago, and it probably was. It’s a moving target, as e-commerce evolves from websites to mobile apps to social media to who-knows-what, but that doesn’t mean you should throw your hands up in exasperation. It means that you try harder.

I have a friend who owns a clothing store in the downtown district of the small town where I live. You know, the type of place that baby boomers remember their parents taking them to in the 1960s. The type of place that doesn’t exist anymore.

Ironically, this one still exists for the same reason that many retailers don’t, and that would be the internet. My friend said recently that his online customer list now exceeds 100,000.

The second-highest response in the NRF survey was that retailers expected to “expand into new product lines or categories.” That’s another topic that we’ve been talking about for what seems like forever, at least going back before the financial crisis of 2008. When a toy-store owner comes to feel that there are no growth opportunities in toys, he or she naturally begins to think about adding books, arts and crafts, gifts, school supplies, whatever. It’s about survival and it makes perfect sense.

The same basic principle has operated at my own company. When we realized that we could no longer expect growth in the magazines we published, our solution was to publish more magazines. Without increasing the size of our staff, we have “grown” from three publications to eight.

It was the third most popular answer in the National Retail Federation survey that caught my attention. Twenty-one percent of respondents said that they expected to raise employee wages this year.

Unfortunately, the survey doesn’t explain the answers, so we don’t know why retailers expect to increase salaries. Is it because they can, because they should, or because they have to?

There is a common misconception among non-business owners in this country that employers simply want to pay their employees as little as they possibly can. Whenever I hear a debate on television about raising the minimum wage, I always want to ask the participants, “Do you think we hate our employees?”

I know a lot of small-business owners, have been one myself for the past 34 years, and am yet to meet one who begrudged his staff their pay. Most of us would be happy to double everyone’s wages if we could do so without going out of business.

If a lot of small retailers are planning to raise wages because they feel confident about sales going forward and want to share the wealth, then that is good news, but somehow I doubt that’s the case. I’m guessing they either have a strategic reason or a legal one.

A very large retailer, Target, announced in September that it would raise the minimum wage for its 323,000 employees to $11 per hour, and it would apply that rate to its 100,000 seasonal workers as well. By the end of 2020 (which is not nearly as far away as it sounds) it plans to raise the company minimum to $15 an hour.

I have no reason to doubt that Target cares about the welfare of its employees, but let’s assume that it is not motivated solely by altruism. Several other possible rationales have been suggested by the business press.

The most obvious would be increased competition to attract more capable people in a low-unemployment environment. With all the store closings we’ve seen this year you would expect there to be a glut of available talent, but the economy has been soaking them up. At 4.2 percent, the September unemployment rate in the United States was the lowest it had been in about 18 years.

Walmart raised the minimum for its 1.2 million workers to $10 per hour in 2016, which pushed the company’s average hourly pay to $13.38. Its motivation was generally thought to be public relations, signaling to consumers that it was a good corporate citizen. That could be even more desirable in the case of Target, whose image is still tarnished by the data breach of 2013.

Or it could be a matter of running some numbers. Target may have calculated the cost of turnover, in terms of recruiting and training expenses, and determined that it would be cheaper in the long run to pay people enough that they wouldn’t leave.

Quite possibly it was a combination of all these factors, but I think there was another reason that would have trumped all the arguments for not raising wages: they were going to have to raise them anyway.

As I’m sure you know, the federal minimum wage is $7.25, but 29 states have now raised their own minimum wage higher than that. Some, like my own state of New York, have further raises scheduled, and many are now indexed to inflation. In a few places, the minimum wage is already more than double the federal rate.

At the risk of sounding like Ebenezer Scrooge, I am opposed to raising the minimum wage. At the risk of winding up like Jacob Marley, I’m opposed even to having a minimum wage to begin with.

That topic is a whole editorial unto itself, but it’s one I wrote several years ago and won’t drag you through again. Let it suffice to say that I don’t think minimum wage laws end up helping anyone, other than perhaps third-world factory owners or robot manufacturers.

My opinion notwithstanding, it appears that most of the country is trending toward a much higher minimum. In the immortal words of Clint Eastwood, “We all got it coming.”

With or without legislation, though, our basic problem remains. We want to pay our employees more, and are hard-pressed to figure out how to do it. The only advice I can give you is the same advice I give to myself.

It’s not a perfect solution, because some jobs are difficult to incentivize, but to the extent possible I have always tried to give employees control over their own compensation. I have found that ambitious people tend to make a lot more than minimum wage. Others tend to leave.


You can e-mail Kevin at kfahy@fwpi.com

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