Monthly Archives: January 2018

Rural thoughts on raising the minimum wage

Many states have raised the minimum wage today. 18 in fact. Several of them to over $10 an hour.  Read about it here

Now don’t get me wrong- I don’t begrudge anybody a chance to make a decent living. I would have loved to be on the receiving end as a worker and as an employer would have been ecstatic to be able to pay my employees more.

3789566982_320590780eBut I do believe that these states did not really try to take their rural communities into account. In particular isolated rural communities.And if they did, it was only to spare a second to think to themselves ‘they don’t have enough people to matter’..

I’ve lived in several incredibly tiny rural communities in a couple of the states listed. We owned a business in one.  A little town of a hundred  people, 135 miles from the city (700K ppl), and 45 miles to the nearest ‘urban’ center (3500ppl) . Our nearest communities had 27 and 300 people respectively.  Those numbers have not fluctuated all that much in the years since we left.

Many rural businesses cannot sustain a fair sized increase in minimum wage. -Not even if it’s over a number of years.

I know many will say “Oh- What’s a buck or two?” – A couple dollars multiplied by 30 -40 hours a week adds up.  On top of that the employer will now pay a higher unemployment tax, FICA and workmans comp.  – all of which can hinder the ability to pay an employee a higher wage.

Those same dollars can also spell the difference between whether that rural community continues have a hardware store, market, café etc…

Here are some scenarios–  Bobs Hardware is a busy little place servicing several tiny communities. Bob needs help.- he hires Joe to come work and pays him the elevated wage. Joe is happy. For a time. -You see, Bob has to either sell more or cut Joes hours to afford the wage.

Bob can’t really sell any more than he already is because he doesn’t have the same traffic an urban or city business attracts. Bob is 145 miles from people. His customers are the farmers, ranchers and families in his area. And they can only buy so much.  So Bob cuts Joes hours.

Or.… Let’s say Bobs Hardware already has several employees. The minimum wage goes up. Bob has to choose. Does he cut everyone’s hours? Or does he let two go and keep Joe? And if he keeps Joe, is Joe going to up and quit because Bob expects him to work harder for the new wage?  Even if he pays a little more than the ‘new wage’- Joe may eventually build up resentment of having to do more work.

Or… Bobs Hardware employs Joe. The wages go up.  Bob can no longer afford to have even one employee. So Bob, who’s already run his rural business for decades l6939468522_bc879c5f3f_bet’s Joe go. Bob can no longer do all the work himself and cuts his business hours which in turn loses some revenue. Eventually Bob just throws in the towel and closes leaving communities without their only hardware store AND an empty/shuttered building on Main Street.  That in turn leads to lower property values for the entire community. And potentially lost revenue for the gas station, since the local farmer filled fuel on his way home from Bobs Hardware and grabbed a coffee at the cafe. In the meantime, Joe was let go and job opportunities in a town of a couple hundred are slim. Joe has moved to the city for work taking what disposable income he had with him, and quite possibly his kids out of school and money out of the donation plate at church that helped fund local causes or 4-h etc. 

Or… Bob raises his prices significantly in an effort to afford his wage increase and in the process actually loses business. – Many rural folk will save ‘it’ for a trip ‘to town’ when ‘it’ is no longer cost effective to buy locally. At the same time, when those folks go to town they will spend the entire day and do ALL their shopping and stop at the café to boot, bypassing their own community all together.

I have witnesses every one of these scenarios over the years.

**99% of small business owners in rural communities WANT to pay their employees better. They genuinely love their towns and the people within and want them to survive and thrive.

**A huge number of those same employers work tremendous amounts of hours themselves “FOR FREE” so they CAN employ someone from the area. (we did)

**Sometimes in lieu of money they find other creative compensation.  We did.  If we hadn’t we wouldn’t have been  able to be open enough hours to even pay ourselves a meager living.

So while I don’t necessarily think the new wages are bad, I do think they will force some hard decisions in rural communities.

In equal numbers, some businesses will find a way and some will not. Some will close. Some will hang on- for a while, maybe longer. Some will thrive.

Next time we’ll talk about some of the creative ways we’ve seen businesses in tiny communities thrive.

~Katy~

Katy is a rural and small town consultant with Tait and Kate Consulting  ~Helping rural communities grow and thrive~

 

 

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