Startups, Risk, and The Minimum Wage

By: zoe Friday July 23, 2021 comments Tags: Startups

When the First Federal Minimum Wage was presented to Congress, it was not widely Supported.

When it was presented in 1933 in the National Industrial Recovery Act Congress overturned it on the grounds that it was Unconstitutional. It wasn't until Franklin Delenor Roosevelt presented it as part of the New Deal - The Fair Labor Standards Act of 1938 - that it was enacted in the sum of $0.25/hr (about $4.60 by the standard of 2017). 

Since that time, the Federal Minimum wage has served as a National Standard - partially upheld by Federal precedent, partially enacted by the power of Individual States - and has risen incrementally all the way up until 2009 when it was raised Federally to $7.59.

Over time, the frequency and total value of adjusted increases to the Federal Minimum Wage have declined since 1938. The increases are not flat and their respective values have diminished (read more about that here).

The Case for Raising the Minimum Wage

First, like mentioned above, the adjusted value of the Federal minimum has stagnated with time. Despite having been raised from $.25c to $7, the real monetary gap between the two has only realistically increased by about Three Dollars, and is less valuable today than it was in the 50's. Since 1980, the approximate value of the minimum wage has remained generally flat.

THE CASE:

On November 3, 2020, Florida Voters Approved Amendment 2, which means FL will gradually increase the States minimum wage requirement to 15.00/hr by the end of 2026. The Minimum wage will be adjusted annually for inflation as it has been since 2004. 

In Congress, there is now a budget proposal to raise the wage at the Federal level to $15 dollars [The Raise the Wage Act of 2021]. The goal is to raise the minimum wage to meet the rate of inflation of commercial services in the American economy. 

Really feeling the Benefits

The fact is, most small businesses and startups struggle to operate in their first years. Operating costs are high and revenue and cash flow are low, hard to acquire if nonexistent. New businesses frequently if not regularly operate behind the curves of both inflation and revenue find of established and large companies. It is not a philosophy but a fact that building a business is, truthfully, expensive.

For a moment, consider the value of what a young business owner could do for their business with $13,400 dollars.

Now consider that is becoming the new cost over 20,200 dollars a year it will- at minimum- cost to hire an employee. Even right out of highschool. Even for a first job.

For a business staffed with just Five Employees, the cost of operating in payroll will increase by 67,000 dollars.

For the millennials, that's an increase of 22,333 cups of coffee at 3 dollars a cup. Ask yourself: What coffee business do you know is going to have the easiest time moving an extra 22,333 cups of coffee. Who already sells their coffee for over three dollars a cup?

Who benefits the most from having their small, less-volume producing counterparts fold under financial pressure and go out of business?

Not pointing at anyone in particular.

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In Part Two, I join a dialogue with other professional small business owners to discuss an insiders view of raising the minimum wage where opinions are cautious and split.

There's no doubt finance can be a touchy subject for new business owners (especially ones with the word "new" next to their name). While we work on getting over those startup struggles together, here's a video on how take a little financial power back for yourself:

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