By David Flemming
On Sept. 6, state legislators on the Minimum Wage Study Committee heard from Ellen Kahler, executive director at the Vermont Sustainable Jobs Fund — an advocate in favor of the $15 minimum wage. Kahler suggested that if Vermont’s small business owners were just smarter and worked harder they could afford the proposed massive increase in wages.
Kahler began her testimony with a chart showing the average size of firms in Vermont. “Vermont is very much a state of small businesses. 90 percent of all Vermont firms have fewer than 20 workers,” she said.
Such a statistic should give legislators pause. Vermont is not a state of large corporations that are able to readily absorb increased labor costs. Ours is a state of Vermonters employing their neighbors and family in ventures that don’t generally have large profit margins.
Kahler acknowledged the possibility of the minimum wage causing small business owners to reduce hours, lay off workers, increase prices or see a fall in profits that could potentially lead them to go out of business.
She downplayed these risks. Why?
Kahler argued that businesses are exposing themselves to these likelihoods because they “aren’t pricing their products correctly (and) they aren’t thinking strategically.” In other words, they’re not charging their customers — us — enough, and the owners just aren’t smart enough to see the big picture potential of their own businesses. (But bureaucrats are!)
Kahler believes pouring money into “small business development centers” — government-funded organizations that show small business owners ways to improve their businesses — can overcome this challenge. According to the Vermont Small Business Development Center’s website, this program receives funding from Vermont’s Agency of Commerce and Community Development. In other words, government would charge taxpayers more money to foot the bill for paying government agents to advise shop holders to charge those same taxpayers more for their goods and services. Sounds like someone’s getting the short end of the stick here.
But even if taxpayers could be convinced to pay up, more government-funded development centers are unlikely to be the answer because, Kahler admits, many small business owners are too busy “putting out fires” and “working 12-hour days” to consider strategies from experts. So, taxpayers are being asked to fund a program that advocates recognize is underutilized yet believe will counter the negative effects of a $15 minimum wage. Okay, then.
The risks of imposing a minimum wage on Vermont’s small businesses are numerous and serious: reducing hours, laying off workers, raising prices that could drive customers away, and the possibility of business foreclosure. The prospect of Vermont businesses countering the damage from a higher minimum wage by somehow increasing their productivity using the strategies suggested by an army of taxpayer-funded government bureaucrats is far from assuring.
David Flemming is a policy analyst for the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.