Warning! The REAL Effects of a Minimum Wage Hike

I want to tell you a little story. It all takes place in a little neighborhood gym in Washington state.

Image Credit: Chrislocurto.com

For all of you who are unfamiliar, the population voted (by a 57% to 42% margin) on a minimum wage increase that took effect in January 2017. This legislation raised the state minimum wage from $9.47 to $11 per hour. It is also set to raise the wage again Jan 2018 to $11.50, $12 in 2019, and $13.50 in 2020.

Political commentary aside, let's take a look at the effects of this minimum wage increase from the viewpoint of this tiny neighborhood gym:

• One member specifically stated that his job at the local diner was cut from 35+ hours a week to less than 30, so he could no longer afford his $25 per month membership
• While others never stated it specifically, the gym lost another few dozen members due to "financial hardship"
• The gym had hired a local high school girl to clean the gym 10 hours a week--she had to be let go
• Electricity and natural gas prices increased due to "maintenance costs associated with minimum wage increase"...so the gym had to adjust the temperature inside the gym to reduce costs
• The janitorial supply company increased their prices by 20-30%, citing increased wages and fleet maintenance costs...so the gym had to reduce the services and supplies provided by the janitorial supply company.
• Hours were cut for the general manager to reduce payroll expenses
• Available hours were reduced for personal training staff, so they now need to "donate" their free time to gain personal training clients

Image credit: baltrimorerising.org

Those examples showed some actions the gym had to take to reduce expenses.
Each of these actions resulted in second and third order effects that also have an impact on the economy:

• The member who could no longer afford his membership actually voted for the wage increase, not knowing it could result in a reduction of his hours. Last I heard, he was searching for another job to pick up more hours
• Many members who could no longer afford the gym memberships ended up moving to another city to look for a higher paying job...this effects local tax base and workforce
• The high school girl that cleaned the gym had to look for another job...there were no part time jobs available to her because no shop would hire her since she is under 18. She did pick up a seasonal job on an orchard, but went 5 months without work before finding it
• Electricity and natural gas...there isn't much else I can do but try to reduce my costs where possible, but the less I spend on energy leads to less revenue for utility companies and they may need to reduce their fixed manpower costs
• The janitorial supply company...I've had to reduce my expenses, which includes the door mat laundering service, paper towel supplies and shower sanitation service. Further cuts may be needed as I control those expenses. I am also looking into sourcing my supplies outside of that company. If other companies are doing the same, the janitorial supply company may lose significant revenue and wind up reducing hours or laying people off. This also reduces the amount spent in the economy by those laid off workers
• General manager's hours are cut...less income to her, so less she is spending in the economy
• Reduced personal training hours...trainers may need to pick up a second job to make ends meet. This makes it very difficult for them to ever create a steady client base, forcing them to maintain hours in a part time job...it's a vicious circle

Again, these are just some observations on a local business. The owner has not drawn a salary in 2+ years because the gym cannot afford it. So before you mention anything about the owner hogging the profits, I can assure you that is not the case. In this case, the owner is taking all cost saving measures he can think of, but expenses continue to rise.

This is a simple example of the domino effect of legislation. Before voting, try to remember to think about the overall effect of that legislation and not just about how it impacts you individually, because I guarantee you even if it doesn't impact you directly, it will likely impact you indirectly.

STEEM ON!