What do minimum wage hikes mean for businesses and customers?
A MARTINEZ, HOST:
The new year brought a little more money for a lot of workers here in the U.S. Minimum wage increases kicked in on January 1 in 21 states. Gina Schaefer is the CEO of a chain of Ace Hardware Stores located in the greater Washington, D.C., metro area. Workers inside the district have been getting more than $15 per hour since last July, with another bump expected later this year, but neighboring Maryland and Virginia don't plan to reach 15 bucks until 2025. Schaefer decided to implement the pay bump across the board in all her stores. Our co-host Rachel Martin talked with Schaefer about how this extra cost affects businesses.
GINA SCHAEFER: One of the things that's really hard for business owners of any size is to plan for the future. So when Washington, D.C., for example, decided that we were going to phase in the $15 minimum, we had several years to do that. So each year in my budgeting process, I could take a look at what we had to do in order to be more profitable, a better place to work and for all of this to make sense. And so you know four years from now, what you're going to have to pay at a minimum - doesn't mean we should just pay the minimum, but it gives us a chance to look at all of the other things that we have to do.
And so that may be getting better cost of goods, which means looking at different vendors. It may mean shopping out service providers that we've used for a decade, our health care providers, our, you know, workers' comp insurance. All of those programs that I think I as a business owner know that I can get complacent with - oh, I love that service provider. They've always been good to us. That doesn't mean it's the least expensive. And so raising the wage is just one of those components of running the business. And if we can look at it a couple years in advance, you know what you're going to pay.
RACHEL MARTIN, HOST:
Does the consumer inevitably have to have some of this extra cost passed on to them?
SCHAEFER: This is one of the biggest complaints when it comes to raising the wage. Oh, prices are going to go up. So I thought of a couple examples. My rent at all of my locations goes up at least 3% every year. That means technically, I could raise my prices 2 to 3%. I don't, but I could. My health insurance coverage for our teammates - and we we pay 80 to 90% of our teammates' health insurance - goes up between 7 and 17% every year, which means I could raise my prices between 7 and 17%. But nobody walks into my door and says, Hey, I bet your health insurance has gone up this year. Are you going to charge me more? But the second you start talking about raising the wages of the people who are actually providing the service, prices for the consumer is is immediately questioned.
MARTIN: But have you had to raise prices?
SCHAEFER: So we have raised our prices probably every year we've been in business because our cost of goods go up from our vendor. We have not specifically raised our prices because the wages have gone up.
MARTIN: The cost of living is going up everywhere. Do you think the updated minimum wage, even just to $15 an hour - do you think that's enough?
SCHAEFER: No, I don't. And, you know, I always hesitate to say that because on one hand, I want my team to be proud of the fact that they are part of an organization that wants to pay higher wages. And we do a whole lot of other benefit kinds of things to, you know, bring the entire compensation package up. But when it comes to straight dollars, I don't think 15 is enough. But the reality of retail and the race to the bottom line for cheapest prices and fewer employees - all of those things impact how those of us who want to pay more can pay more.
MARTIN: Is your retention better as a result of the higher wages?
SCHAEFER: Yeah, I think our retention is a lot better. I mean, this last year posed some challenges. We sold 20% of our business to our employees in July as part of an exit strategy that my husband and I have formulated. And so I now call 160 of my teammates co-owners, and I think that's going to help us make a difference.
MARTIN: Gina Schaefer - she's the CEO of a chain of Ace Hardware stores. Thank you so much for taking the time.
SCHAEFER: Thanks, Rachel. Transcript provided by NPR, Copyright NPR.