What Makes Labor Costs Different? Control.

It’s tough running a small business.

Your rent goes up, but what can you do? So you muddle on. Fuel costs go up, but you muddle on. The cost of supplies goes up—food, inventory, whatever—and you muddle on. The cost of borrowing goes up, and you muddle on. Health insurance premiums go up (oh man do they ever), and you muddle on.

But lawmakers talk about raising the minimum wage, and you throw up your arms and threaten to close your doors.

So what makes the cost of labor different from all those other fluctuating costs business owners must deal with every day? Labor is the only cost of business where you set the price.

And that’s where I think a lot of this emotional response to the minimum wage comes from. It’s about control. Both controlling one’s costs and controlling one’s employees. A government mandated minimum wage upsets the traditional power relationship between management and labor. And understand: for many small business owners, that’s the only power relationship in which they currently hold the advantage.

Like I said, it’s tough running a small business. I know. You put so much equity into your business—both sweat and monetary—and yet it feels like so much of what determines success or failure is beyond your control. The economy. The competition. Consumer tastes. Disruptive technologies. Taxes and regulations. Hell, even the weather. And now the City of Seattle is going to tell you how much to pay your workers? Folks who’ve never owned a business—who’ve never hired and fired—may not understand it, but the experience often comes with a profound sense of a lack of control.

I get it. And I’m not dismissing the very real financial challenge that a $15 minimum wage would pose to some businesses. But my advice to small business owners in general is to acknowledge that at least some of your negative response to this proposal is emotional, and to trust that like most of the other challenges you face on an everyday basis, you will ultimately find a way to muddle on. In fact, experience from previous substantial minimum wage hikes tells us that that’s what most small businesses manage to do. Because as much as it doesn’t feel like it, you actually have a lot more control over the success or failure of your business than simply the power to dictate wages.

Comments

  1. 1

    Travis Bickle spews:

    Yes, most things seem to increase in cost, over time. The one thing that costs less is communications, at least in my experience, compared with what I paid in the mid-90s.

    For virtually all other items, it seems that the marketplace in one way or another is responsible for those increases (or decreases). Gas prices go up and a delivery fee is added, and plastics cost more. Heavy items that require delivery cost more – paper, for instance. We might not like it, but it’s mostly a market-based change in cost. And those changes in cost are comparatively fairly small.

    With the minimum wage issue, what’s demanded is an immediate, legislatively enforced 60% increase in the largest component of the expenses of a typical business. Comparatively speaking, it’s a massive shift in a cost item that has nothing to do with the marketplace. A fairly small group of people loudly demand something and it’s (mostly) given to them, because FAIRNESS. You didn’t get everything you wanted but you got most of it.

    So the response is different than the response to another nickel per gallon increase in the price of gas. It might be a visceral and emotional response. But ‘control’? C’mon. For a lot of businesses it’s a difference between making it, or not.

    Goldy, in your link you pointed out that most businesses fail. Don’t ignore that reality; you were the one who brought it up. This large increase in wage costs, for many businesses, will accelerate that decline into eventual failure. For them, the emotional response might be that they took a risk, and up to now were just getting by, and now they won’t even do that well.

    In your link you wrote:

    And there’s no rule that says the forces of creative destruction may only be unleashed by the private sector.

    Just think how it must feel to know that your business was creatively destroyed by your mayor and your City Council, and not by the marketplace you thought you knew.

  2. 2

    Alex Blaze spews:

    @Travis: Actually, no, few prices are set entirely by market forces. Prices are affected by state monopolies (fees, utilities, etc.), taxes, government-granted monopolies (anything that has a copyright, like software), subsidies, regulations, etc. Even those that are mostly set by the market don’t necessarily do so under competition (like health care, which is not a competitive market).

    Also, you’re just plain wrong that near-minimum wages are a major portion of most small business’s budgets.

    Last, if businesses are really just trying to keep from closing up shop, then why can’t these folks who close their businesses ever be found after a minimum wage hike happens? And how does the story work go, anyway, when a business *and its competitors* all have to pay more for some workers’ wages?

  3. 3

    piggy spews:

    The alternative to a minimum wage hike is to continue subsidizing businesses that can only succeed by paying their employees poverty level wages. I’m absolutely in favor of eliminating businesses that profit by imposing their labor costs on people other than their customers.

  4. 4

    NW Citizen spews:

    Just curious as to how the minimum wage proposal would affect worker owned cooperatives. Would the worker owners be required to pay themselves a minimum wage?

  5. 5

    aimai spews:

    Excellent point about the emotionality surrounding labor costs, as opposed to other inputs to a small business. I also think that there are many people who are not small business owners who are horrified at the idea of a living wage for poor people–although they assume that the barrista or the grocery bagger makes a living wage they don’t like the idea of such people getting “a lot of money” for “such an easy job.” This is all part of the general kiss up/kick down attitude of american workers–its the same reason that people give for attacking teacher’s unions or other public unions for getting benefits for their workers that “ordinary” workers don’t get. Rather than seeing hte benefit in rising wages for everyone some people prefer to imagine that theres an immiserated working class just below them that doesn’t compete with them or do better than they do. Its kind of a twisted “just world” hypothesis applied to wages.

  6. 6

    JSF spews:

    Maybe your business model doesn’t work if your employees have to live in poverty for you to succeed.

  7. 7

    spews:

    @4 Are worker owned cooperatives subject to state minimum wage laws now? Because the Seattle ordinance wouldn’t redefine the minimum wage, but merely raise it.

  8. 8

    Mark Centz spews:

    Horsey had a good one along this line about ten years back, it’s no longer at the PI archives, but it was a three or four panel ‘driver talking at pump’ to Saudi, Oil exec and finally The Gov, each of them in turn explaining that they need to raise their take at the pump and the driver responding ‘ok, sure, I guess’ until The Gov tells him the Gas Tax needs to go up a few cents for increasing maintaince costs and then he gets all righteous.
    So add local taxes to wages on the short list of costs that get excessive attention.
    A link on Baby Blue- You’re back on top!

  9. 10

    wl spews:

    @4 and @7, if they pay wages minimum wage laws apply. If they are a true co-op and they pay dividends it does not. Phony co-ops that try to circumvent wage and hour laws and tax liabilities by giving their employees a nominal certificate of ownership are not exempt. The IRS and WA L&I are not kind to employers who try these games, if they are caught.

  10. 11

    Roger Rabbit spews:

    You’re wrong, Goldy. The city isn’t going to tell businesses how much to pay their workers. The proposal is to enact a minimum, not a pay schedule. gigantic difference! Businesses can still pay whatever they choose, provided it’s not below the minimum.

    We have a minimum now. We’ve had it throughout living memory. No business owner alive today has lived without a minimum wage.

    All the city proposal does is put a higher floor under wages than existing federal or state rules. One can argue that’s appropriate because living costs are much higher in Seattle than the state or national average.

    It’s not the end of the world for businesses if they have to pass on a moderately higher labor cost to their customers. It is the end of the world for workers if they can’t earn enough from a full-time job to pay basic living expenses. That will be the end of the world for their employers, too, if all of Seattle’s minimum wage workers are forced to live and work elsewhere because they can’t live in this city on their incomes.

  11. 12

    Roger Rabbit spews:

    @1 I didn’t hear you complaining when the food industry raised the price of a can of tunafish by 60% overnight. How much has beef gone up over the last three or four years? By a couple hundred percent? Did you complain about that? How much has Seattle rent increased since the last minimum wage raise five years ago? Have you calculated that?

    Why is it, Cheapskate Bob, that the price of everything else can go up, but workers cannot charge more for their labor? What makes workers exceptional, what causes you to single them out, for unfavorable economic treatment?

    Yeah, I get it, Bob. Like all Cheap Labor Conservatives, you despise workers and resent every penny they’re paid for their labor, even though it’s their labor that produces all of America’s wealth.

  12. 13

    Roger Rabbit spews:

    Let me be clear about this. Capital does not produce wealth. Without labor, capital just sits and does nothing. Labor produces wealth. Every bit of it. Without workers, nobody would have anything. So isn’t it time we began appreciating workers a bit more?

  13. 14

    TerraceHusky spews:

    Well stated, Goldy. I agree that there’s an emotional element to all of this. A perceived loss of control from the business owner.

    When it comes to business costs, though, labor costs are one of the only costs which have any substantial likelihood of creating positive feedback. All of the examples you listed (fuel, supplies, health care, rent) are likely to be pocketed by wealthy individuals who are FAR less likely to spend their money than a minimum wage earner would be. Increasing labor costs across the board (city-wide, state-wide, or nationally) creates a lot of new disposable income for low-wage workers. Those low-wage earners will spend the lion’s share of their pay increase, generating higher sales for businesses, thus mitigating the true cost of that higher wage.

    This goes back to the Ford example. Whatever Ford’s twisted motivations, increasing wages was a good idea that led to other businesses following suit, and eventually led to workers who were wealthy enough to buy in large enough quantities to boost sales. A positive feedback loop.

  14. 15

    Roger Rabbit spews:

    The most common — and bogus — argument you hear from minimum-wage opponents is that the market sets pay according to what skills are worth.

    That’s absolutely false. Relative bargaining power of the parties, not some “worth” mechanism, determines wage levels. And bargaining power usually is stacked in employers’ favor.

    That’s why we need laws protecting workers from employers using their unequal bargaining power to drive wages below what it costs workers to live. Because if employers are allowed to do that, public benefits have to make up the difference, which results in unjust enrichment of employers at taxpayers’ expense.

    Worst of all, conservatives not only want employers to have all the power, and workers to accept pay below what it costs them to live, but they also want to take away the food stamps and other public benefits that allow workers earning below-subsistence wages to survive.

    Is it intent to work these people until they starve to death?

    Wherever this argument goes, don’t let Cheap Labor Conservatives get away with saying minimum wage workers aren’t earning more because they’re not worth more. Because that isn’t true.

    They’re not earning more because employer have the power to keep wages down; and, as long as employers have that power, they will keep wages down.

    At the very bottom end of the wage scale, minimum wage laws take that power away from employers and transfer it to the state, which is where it belongs, because the welfare of our lowest-paid workers is everyone’s concern.

  15. 16

    keshmeshi spews:

    I see Goldy’s point, but labor costs are basically the only business expense where a response to a proposed increase is: You’re worthless, your product/service is worthless, die in a fire already.

    Imagine a business owner saying that to his/her landlord.

  16. 17

    keshmeshi spews:

    I mean, you’re not going to successfully negotiate lower prices from, say, Sysco by attacking Sysco’s self-worth. But relentlessly attacking low-wage workers is completely normal and expected. And, you know what? It works. I’d wager that most Americans who earn less than median don’t regard themselves, their skills, or their experience very highly.

  17. 18

    you gott be kidding spews:

    Goldy,

    You compare a 60% labor increase to standard increase rent, gas, supplies, etc. This is a straw man tactic. If you want to make comparisons of 60% increase to 60% increases it wouldn’t be a straw man, but that is not what you are doing. Can you name another time when any of those other cost comparisons increased 60%? Rent increases on a pre-determined schedule according to the lease, and the business owner structures his business accordingly and has the opportunity to enter the lease or not. The landlord cannot half way through the lease increase the rent by 60% as is happening with labor. If at the end of the lease the landlord wanted the new lease to include a 60% increase in rent you don’t think the business owner would, “throw up your arms and threaten to close your doors” or most likely not renew their lease and move?

    In the case of gas, if it rose 60% in 3 yrs that shipping cost for groceries and other goods wouldn’t also raise accordingly and cause inflation. If gas increases 60% it wouldn’t be just business owners throwing their arms up, but the entire population of this country.

    In each of the cost comparisons you cite, gas, rent, or COGs a 60% increase might in fact put the company & it’s employees out of business, it is not just labor increases that can cause a business to fail but all the other comparisons you mentioned if not managed or planned for properly. Price, labor cost, and demand do not exist in a vacuum. If you increase one you affect the other 2, despite bogus claims to the contrary.

    Employers only have control of employment, they have no control of their employees, for you to suggest otherwise is another straw man. The employees are free to make their own life choices & choose to work for the employer or not. I am not sure where this paint brush you use to paints business owners as just a step above plantation owners comes from. 70% of businesses are small business, and the majority of them are owned by middle class people. But $15NOW villainizes these small businesses along with McDonalds & Walmart.

  18. 19

    Roger Rabbit spews:

    @1 Actually, Bob, your understanding of basic economics is as superficial as your (lack of) comprehension of everything else.

    You may be a great radiologist, but you don’t know squat about anything else — which illustrates why people who become doctors, engineers, and other specialized workers should be forced to take liberal arts and humanities courses as part of their higher education. So they know something about how the world works, and don’t have their heads stuck up their asses like you.

    I want to talk about general inflation and oil inflation separately, because they’re two different things.

    Let’s start with monetary inflation. Monetary inflation is engineered by manipulation of the money supply, although the control mechanism is indirect, because money supply expands or shrinks as a function of bank lending. If banks won’t lend, policies like quantitative easing and zero interest rates won’t lead to money supply expansion, which is why the last 5 years of Federal Reserve “easy money” policies haven’t produced inflation.

    Economists discuss the effects of deflation on the economy, and non-economists argue about whether a little inflation is a good or bad thing, but let’s skip that discussion here and move on to real inflation.

    Real inflation is an altogether different beast. Real inflation is a change in the actual cost of producing something that occurs independently of monetary inflation/deflation, and is not a function of money supply or monetary policy, but of the cost and effort required to, say, extract a barrel of oil from the ground.

    Oil is an excellent example of real inflation, because the real cost of obtaining oil has increased as a result of increasingly having to turn to “harder to get” oil to satisfy the world’s oil demand.

    Saudi Arabia has the world’s easiest-to-get oil. It exists in huge underground rock formations bordering (and extending out under) the Persian Gulf. All you have to do to extract it is drill fairly shallow vertical wells — the cheapest kind of wells to drill — and pump in seawater to force the oil up into collector pipes. You don’t see “nodding donkeys” in Saudi Arabia because Saudi oil isn’t extracted by countless pumps scattered over the landscape. It’s driven out of the rock by hydraulic pressure, and comes up the well without mechanical lift. It then goes to separator tanks to skim the oil off the water that comes up with the oil.

    In the early days of Ghawar, Saudi Arabia’s and the world’s biggest oilfield, the wellhead liquid was almost pure oil. Today, after 80 years of production, much of Ghawar’s oil has been removed and the wellhead liquid is about 75 to 80 percent water — in other words, about three or four barrels of water for every barrel of oil. It takes more work to get a barrel of oil out of Ghawar now, so the cost of Ghawar oil has risen from a few cents in the early days to about $5 now. But that’s still the lowest-cost oil in the world.

    Compare that with Canadian oil sands, arctic oil, or deep sea oil, where production costs can range up to $60 a barrel or more. That high-cost oil is still profitable when crude prices are in the $90 to $110 range, as they are now. But the real cost of that oil is much higher.

    The fuel, plastics, and other products made from oil cost more in real terms when the feedstock costs more in real terms. The world economy is less rich when a $3.50 gallon of gas is made from $60 oil instead of $5 oil.

    The reality, of course, is that our oil supply is a mix of low-cost, medium-cost, and high-cost oil from a variety of sources. What’s important is that the average real cost of oil has risen over time, and will continue to rise, because low-cost oil is steadily being depleted and replaced with higher-cost oil. This fact means that as long as the global economy remains significantly dependent on oil, the ever-rising real cost of oil will be an efficiency-lowering, wealth-reducing force in the real economy. In short, the rising real cost of obtaining oil is making us all poorer in real terms, and the only thing we can do about it is replace oil with other energy. That, to some extent, is happening as a result of the fracking gas boom, but the impact of fracked gas is limited and temporary.

    When Cheapskate Bob talks about things like “the market-based costs” of communications and gas, he’s really talking about prices, which are completely different from costs.

    There is only a tenuous relationship between cost and price. Once Microsoft creates a software program, it can create copies for almost nothing which it sells for hundreds of dollars. At the other end of the spectrum, mining companies may sell coal or gold for less than it costs to dig it out of the ground for a period of time, in order to stay in business while waiting for the market prices of those commodities to move higher, meanwhile streamlining their operations and cutting costs as much as they can. The point is, businesses price their products and services according to what the market will bear, not based on what it costs them to create those products and services, and whether they’re profitable or not depends on whether the market is willing to pay more than cost for those products and services. If not, providers eventually will go out of business, and the products and services will become unavailable or command higher market prices as the supply drops and remaining suppliers raise their prices.

    Bob is right that market forces determine prices. But market forces, generally speaking, do not determine real costs. How much you pay for gas at the pump has nothing to do with whether the gas came from cheap Saudi oil or expensive Canadian tar sands oil. (For what it’s worth, all of the gas sold in western Washington comes from Alaska oil, which is toward the expensive end of the real cost scale.)

    Monetary inflation doesn’t change the real cost of anything. If prices go up because of currency inflation, that doesn’t change the equipment, fuel, and labor requirements of getting a barrel of Saudi or Alaskan oil out of the ground. Oil extraction goes on as before, with the same real costs, and monetary inflation only changes the nominal dollar value of those costs.

    Finally, when businesses raise prices because they can, we call that “inflation” even though there may be no real or monetary inflation affecting the price. Such “inflation” simply results in a change of bargaining power in the marketplace. Such “inflation” obviously can’t be blamed on either producer inefficiency or government policy. It is strictly a marketplace shift; and not, technically speaking, inflation at all.

    And when you fill up at a gas pump near your home, if the pump price has changed, it’s quite possible that all three forces — real inflation, monetary inflation, and marketplace price shifts — are at play.

  19. 20

    Roger Rabbit spews:

    @18 Seattle’s minimum wage workers last got a raise in 2009. How much have food and rent prices increased in the last 5 years? Over that time, I don’t think you’re very far from 60% increases for some items.

    How many of the businesses complaining about a minimum wage increase haven’t raised their prices in the last 5 years? How many of those who did passed some of their price increases to their workers by raising their wages?

    There has been no increase in the minimum wage for 5 years. Many workers are still paid the exact same wage they received 5 years ago. Their employers have pocketed all of the price increases that have occurred since then. It won’t kill them to give their minimum wage workers a raise. Whether they do so voluntarily or because the law requires them to is immaterial.

  20. 21

    zoniedude spews:

    The ability to “muddle” through is actually more important here than in other cases. The key is that increasing the minimum wage will likely cause some economically inefficient businesses to fail. But their clientele doesn’t go away. When their clientele goes to the remaining businesses, the remaining businesses are already funding their fixed costs, so the improved revenue goes almost entirely to profits. In addition, increases in volume almost always result in volume discounts that further increase profits.

    Sure it’s bad for the owners who fail, but it’s a boon to those that survive. Those who fail were not efficient and didn’t belong in the business. The improved profitability of the remaining firms will make for a much more vibrant economy and likely stimulate an overall increase in employment since much of what the failed firms spent their revenue on was fixed costs.

  21. 22

    you gott be kidding spews:

    @ 19 Rabbit you are showing that you don’t know what you are talking about.

    Seattle’s minimum wage workers last got a raise in 2009

    No ever since 1988 when Initiative I-518 passed indexing minimum wage to inflation in has increased yearly in accordance with infaltion. Which is why our $9.32 is the highest state minimum wage in the country, and not too far away from what the minimum wage would be in todays dollars at it’s highest purchasing power in 68′ of $1.60/hr. If that had been adjusted for inflation it would be $10.86 today. So every year since 1989 minimum wage workers have received a raise. Now it is fair to argue that it didn’t go up enough, but to say they haven’t had a raise since 09′ is inaccurate. The biggest jump of course was in 89′ when it corrected from being too low and went from $2.32 to $3.85 in 90′, then $4.25 in 91′ and has been raised every year since. Correspondingly Seattle had two years of inflation of 7.4% in 90′ & 5.8% in 91′ much higher than the national avg., and the two highest years in the 35 yrs since.

    How much have food and rent prices increased in the last 5 years? Over that time, I don’t think you’re very far from 60% increases for some items

    Fortunately for us that information is available. Rent since the recovery from recession in 09′ has increased about 4% per year, but this is for exactly the 5 yrs you use as an example if you go back or forward another year it changes. So from 5 yrs ago is from a 20 yr false low caused by a recession, when there was a dramatic increase to correct this. The years before, during the recession there was a dramatic decrease in rents. So you are much closer to a 20% 5yr rent increase than the 60% as you guesstimate. Food much closer to the current CPI as a 5 yr avg. It was 1.9% in 09′, 0.8% in 10′, 3.7% in 11′ and between 2.5-3.5% in 12′, and 3-4% in 13′. This is according to a CBO report published at the end of 2011. So not exact #’s for the last 2 yrs, but looks around a 5yr window of 11.9%-13.9%, and as you can see not even close to your 60% estimate.

    This wage increase is a big jump forward for a lot of people, and yes it is also likely to cause inflation if you look at Seattle’s recent history. But the jump forward is bigger than the inflation caused, of course it is a net pay decrease for those middle class that don’t get a raise with the corresponding inflation. Also back when I-518 passed 100,000 low wage workers got a raise, but another 11,700 jobs were eliminated due to the increase. After 2 yrs half of these eliminated positions were refilled by older more experienced workers (ie less opportunity for unskilled, and minorities.) This is according to the UW Study by PHD economist, State Treasurer, and Democrat in favor of minimum wage increase, Jim McIntire, so hardly a right wing source.

    I support a minimum wage increase, granted I would have preferred one less radical as it does have the negative effects of job loss & inflation if you look at the last time it occurred here in Seattle. People who don’t say raising the minimum wage doesn’t cause job loss or cause inflations are either ignorant or disingenuous. It still is a net positive, but if we’re honest about the negative effects a less dramatic approach seems prudent.

    Here are sources…

    http://seattletimes.com/html/businesstechnology/2021724598_seattlerentsxml.html

    http://ballotpedia.org/Washington_Minimum_Wage_Increase,_Initiative_518_(1988)

    http://blogs.seattletimes.com/opinionnw/2013/12/06/minimum-wage-seattle/?syndication=rss

  22. 23

    wl spews:

    When the minimum wage is low, employers have an advantage in that they can pit one employee against another. An employer can keep the employees fighting against each other for meager raises that the employer cares to dole out to his favorites. I have seen this in many non-union shops.

    An employer can always pay over a minimum wage, but a high minimum wage will narrow the range from highest to lowest paid employees. This will reduce the level of desperate backstabbing competition. Employees will still compete, especially in high turnover occupations, but it will be less severe. They will mainly compete to keep their jobs or for more hours, just not for wage rates.

  23. 25

    spews:

    @25 Yup, nobody drives traffic quite like Atrios. I was happy to see my new server stood up to the challenge.

  24. 27

    Jack spews:

    All liberal arts majors should also be forced to learn a trade while they’re getting their degrees. That way they at least might have a job skill to go along with the degree.

  25. 28

    Roger Rabbit spews:

    @22 I’m sorry, you’re right, I was thinking about the federal minimum wage. That hasn’t gone up since 2009. I also need to correct myself on other thing I said. Inasmuch as the proposals under discussion wouldn’t raise the city minimum to $15 right away, we’re not talking about 60% over 5 years, we’re talking about 60% over 7 year or 10 years or whatever the implementation schedule is.

  26. 29

    Roger Rabbit spews:

    @27 Your suggestion isn’t bad, but the sentiment behind it makes you a real ass.

  27. 30

    Roger Rabbit spews:

    Maybe if we required welders and mechanics to get liberal arts degrees fewer of them would vote for Republicans — and against their own economic interests. Polls show voting for
    Republicans goes down as education goes up.

  28. 31

    Roger Rabbit spews:

    I considered learning a trade. When I was in college, I almost signed up for a linotype operator school, the idea being that I was working my way through college and a trade would pay better than the minimum wage jobs available to students. I’m glad I didn’t. Within a couple years, linotype operators were being laid off in droves as newspapers and printing plants adopted computer technology and hauled their linotype machines to junkyards.

  29. 32

    you gottabe kidding spews:

    @ 26 Goldy, first thank you for the exchange of ideas in a respectful manner. But you will notice in my example of fuel prices I use a 60% increase over 3 yrs, which is the phase in for big business. The point is to compare apples to apples which I was trying to do. Comparing the $15 minimum wage with the standard & expected raises in rent, cogs, or gas is not apples to apples, which is why it is a straw man. If you want to compare the minimum wage to these other things you have to do so in the same scale & time frame, which I was trying to do. If gas, cogs, or rent went up 60% do you really not think small business owners wouldn’t be up in arms over that also? Like they are now about labor.

    In the other example of comparing rent, most leases run as long as the phase in for $15, so I didn’t put an exact time frame. But any renter private or business would also be up in arms over a 60% raise. Wouldn’t matter whether it happened mid-lease or at the end of a lease, don’t you agree? So it is not just a 60% increase in labor that elicits such a strong response, it is a unexpected 60% increase in any significant cost that would get a response as it will put some people out of business. I agree with your statement, “you actually have a lot more control over the success or failure of your business”. It is incumbent on the business to adapt and innovate in changing market conditions, if you can’t, you go out of business, just ask Blockbuster or Tower Records. Business is survival of the fittest, which you all seem fine with, but not so much for labor.

  30. 35

    Roger Rabbit spews:

    @32 “Business is survival of the fittest, which you all seem fine with, but not so much for labor.”

    Business survival is optional, human survival is not. Only an deficient moron would equate basic human needs with a capitalist system’s Darwinian triage of businesses.

  31. 37

    spews:

    @32 This post is specifically about small businesses. So it is the 10-year small business phase-in that applies.

    As for unexpected double-digit cost increases, I got that from vendors all the time with my business. The cost of buying a co-op ad in a mail-order software catalog—our number one cost of business by far—increased more than tenfold during the 5 years we bought them. Nobody cried for us.

  32. 38

    you gotta be kidding spews:

    Rabbit @ 33 they are not my figures you are calling horsesh*t, they are the Seattle Times figures, which ironically is the same source you use. Only difference is your article shows no figures, and the one I linked shows the exact figures you asked for, rent increase over the last 5 yrs. Seattle rents rose 6% last year, and about 20% over the last 5 yrs, but this is a far cry from the 60% you imagined. So I may be “ethically deficient”, I would suggest you are the moron. I have not made repeated factually inaccurate statements to try to support my point of view like yourself. Statements like the minimum wage workers haven’t gotten a raise since 09′. Or that rent & food prices have risen 60% in the last 5yrs. Jesus man, hyperbole much? Here is the link again, you should actually read it.

    http://seattletimes.com/html/localnews/2021673014_rentincreasesxml.html

    Oh and you are also wrong in that, “most leases run one year”. While yes it is possible, for commercial real estate that would be very uncommon. The startup loan term for any business with a lease is associated with the length of the lease. Does it make sense that startup loans have a 1 yr term? Or that the term would run longer than the lease? The answer is no to both, the startup loan term is usually more than one year (unless low starup cost), and can be as long as the lease for the physical location, but not longer than the lease. Again this shows how little you know about business with your statement that leases usually run 1 yr, which might be true at your apt., but not for commercial real estate.

    @ 37 Goldy your point that the small business time table should be used is a fair. But even a 60% increase over 7 or 10 yrs amounts to an increase well above avg. Comparing apples to apples, this unplanned for, and above avg. increase whether it was fuel, rent, cogs, or labor would elicit a strong response because it will put some small business out of business & their employees looking for jobs in an increasingly competitive labor force due to the same increased minimum wage. The only things that inflate like that are health care & college tuitions (sadly).

  33. 40

    Roger Rabbit spews:

    @38 “Oh and you are also wrong in that, “most leases run one year”. While yes it is possible, for commercial real estate that would be very uncommon.”

    I wasn’t talking about commercial leases. I was talking about the rent that workers living in Seattle have to pay on apartments. I never said anything about commercial leases.

  34. 41

    Roger Rabbit spews:

    @39 This is a recent Seattle Times article on apprenticeships.

    http://blogs.seattletimes.com/educationlab/2013/12/09/apprenticeships-great-jobs-and-good-pay-but-scarce/

    “Trades” are usually thought to include such occupations as welder, mechanic, ship scaler, boilermaker, electrician, plumber, steamfitter, heavy equipment operator, ironworker, crane operator, painter, cement mason, bricklayer, roofer, and so on. Basically, blue collar work associated with apprenticeship programs and/or on-the-job training.

  35. 42

    Roger Rabbit spews:

    @38 The Seattle Times article (from August 2012) I linked to said,

    “Renters have flooded the Tenants Union of Washington State hotline in the last year, shocked at getting monthly rent increases of $300 and more.”

    It then listed median increases for some specific neighborhoods as follows:

    “In the last two years, the median rent for Seattle studio apartments has gone up $434 in Wallingford, $419 in Capitol Hill, and $306 in Ballard. Outside of Seattle, median studio rent increased over a two-year period by $423 in Bellevue, $361 in Federal Way, and $295 in Everett.”

    It then gave a specific example of a 38-year-old woman renting a 2-bedroom unit in the Green Lake area, whose rent increased $360 to $1445 in one year. That’s a single-year increase of 33.1%.

    I myself have seen some grocery items jump 40% to 60% overnight, after taking into account reductions in unit quantity. For example, some frozen TV dinners that used to be 14 or 16 oz. have shrunk to 8 oz. or 9 oz, and have also gone up in price; and tunafish cans shrank from 6.25 oz. to 5 oz., a 20.8% decrease in what you get for your money before adding any price increase. Shrinking package sizes and coupling smaller portions with price increases is a favorite tactic of food processors to hide from consumers just how much they’re raising prices.

  36. 43

    Roger Rabbit spews:

    @38 (continued) In any case, your argument misses the point, because raising the minimum wage to $15 in Seattle is based on what is considered a liveable full-time wage here. If the goal is a “liveable wage,” how big the existing deficiency is really is immaterial.

    Supporters are saying they can’t live on less than $15/hr. Those taking issue with their argument really should focus on the accuracy of this statement.

    Going to $15 is a big jump from the current statewide minimum of $9.32, but it doesn’t happen all at once. All proposals contain a phase-in period, generally at least two or three years.

    Newspapers like the Seattle Times publish official government inflation statistics. There’s been much debate over the accuracy of these figures and the methodology used. The government excludes fuel and food prices from its measure of “core” inflation because the prices of these items are volatile, but fuel and food happen to be two of the largest expenses for low-income households, and they tend to go up faster than general inflation.

    Government inflation statistics offset climbing rent, food, and fuel prices with falling prices for things like computers and big-screen TVs, but declines in the prices of those goods don’t mean much to households struggling to make ends meet, and including them in inflation computations masks the true size of inflation in essentials.

    The bottom line is that a business must bring in more than its costs to survive, and workers need to bring in what it costs them to live, plus work-related expenses like transportation, or they can’t continue to furnish their labor. A worker who is going in the hole to work in a high-cost area will move somewhere else where he can get a job that supports him.

    The basic thought behind the $15 movement is that every full-time job should pay enough to support the worker in that job. As a practical matter, the vast majority of workers have to support more than just themselves; either singly or as members of a family, they are also supporting children. Someone has to support the non-working members of society, and that burden gets spread over the workforce, and minimum wage workers are not spared their proportionate share of that burden.

  37. 44

    you gotta be kidding spews:

    @ 42 rabbit are you really citing singled out examples to try to defend your ridiculous statement that rents & food have gone up 60%? I showed you the data that no you are wrong they have not, but you must really be a moron as I suggested if you think the fact tv dinners have gone up is an accurate baromoter food prices. Or that a single woman whose rent went up 33.1% in one of the most desirable areas in the city is indicative of rents rising 60% for everybody. I snowed you the data, it’s been about 20% over 5yrs, which is a lot, but not 60%. What’s even more ridiculous is you try to discredit the Seattle Times figures on rent increases, and they are the same source you are using for your allegorical evidence.

  38. 45

    John spews:

    When your costs increase, increase your prices. This isn’t rocket science, guys… either you compete and succeed or you don’t compete and fail. That’s what the “free market” is all about, right? So stop whining and man-up at being a “businessman”.

  39. 46

    Puddybud - The ONE and Only spews:

    Puddy got a chance to listen to Tom Douglas’ labor cost discussion on the Seattle Channel through Michael Medved last week. Interesting discussion.

    So paying all of his restaurant staff $15/hour would incur $3,000,000 more in costs than he took in as sales, a $3,000,000 deficit unless Tom raised all his prices. Then would the same DUMMOCRETINS who support his restaurants at the prevailing meal price point visit with the increased meal costs? Hmmm…? Do these DUMMOCRETINS actually know about the $15/hour change request? Well DUMMOCRETINS are proven to be low information voters.

    Another of those law of unintended consequences.

  40. 47

    clb spews:

    Let’s check the numbers this “High Information” voter is giving us. Since the minimum wage is going up by $5.68/hour, lets assume, being generous to the owner, that he is open 16 hrs/day, 365 days/yr. then each average employee would cost about 33k/year more which suggest he’d have to average 90 employees to get to that number… and all of them would have to be currently be being paid minimum wage. I’d guess that peak times don’t even have that many employees so I’d guess those numbers are a smoke screen at best – or horsecrap more likely.

    hmm…. so what’s worse? A low information voter or a “high information” voter whose “information” is all horsecrap?

  41. 48

    Liberal Scientist is the "Most vile leftist on this blog!" spews:

    clb, you fall victim to one of the Classic Blunders…

    Ha ha, you fool! You fell victim to one of the classic blunders! The most famous of which is “never get involved in a land war in Asia,” but only slightly less well-known is this:

    (paraphrasing):

    “Never assume that facts and logic will ever penetrate the stupidity field that surrounds the puddibigot!”

  42. 49

    Travis Bickle spews:

    @ 45

    So stop whining and man-up at being a “businessman”.

    Ah, the Clayton Williams argument.