Tuesday, October 03, 2006

Why Eliot Spitzer’s minimum wage rise pledge won’t help you:

One of the few things Eliot Spitzer actually said he would do if elected was raise the minimum wage in New York. When a politician promises that they will raise the minimum wage it must be realized that its purpose is simply to get votes from ill-informed citizens and not put more money in their paycheck. To prove my point I thought I would share an example based on personal experience.

My wife has worked in retail her whole life. Currently she’s the district manager for a large retail company overseeing a large portion of Manhattan and parts of Queens. As part of her job she is in direct control of approximately 140 employees. She decides who and how many to hire and what she is going to pay them when she does.

At the beginning of each year the company gives her this little thing called a budget. Her budget includes everything from rent, advertising, utilities, her own expenses and, you guessed it, labor. The company sets her budget based on what they project sales to be for the year breaking it down to a monthly basis.

The way this ties into minimum wage is that Eliot Spitzer can increase the minimum wage all he wants but my wife’s budget is still going to stay the same. What raising the minimum wage will mean though is that it will be just less that she can spread around in hourly labor as each employee who is getting paid a higher minimum wage will eat more of the slice of the budget that goes to labor.

To show how serious retail companies take labor costs my wife runs a system that gives her real-time labor demand for all her stores. The software at any given moment from her laptop tells her where her stores are in respects to there projected sales and if the percentage of labor required by the company is over what has been allotted for that amount of sales. For instance this past Saturday and Sunday morning after a slow week, my wife spent the morning calling stores to tell them they needed to cut certain people off the schedule for the day so the store can come in budget.

Hopefully I didn’t bore you but with Democrats set to take over New York’s highest position and maybe even Washington, a minimum wage boost will be all the talk. Just remember when they do start to talk about it, people like my wife won’t be allocating more of their budget to cover it, they’ll just be giving that person less hours.

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