In recent months, the fight for an increase in the minimum wage has raged at both the local and national levels with strong arguments on either side of the debate.
More than 30 states are set to consider legislation or ballot measures to hike the minimum wage in the coming months. Already, 22 bills have been introduced in 14 states and the District of Columbia on minimum wage increases and related issues in the first weeks of the 2014 legislative sessions, according to the National Conference of State Legislatures.
What role can municipalities play in shaping policies that are sound for the city’s growth and for individual, family, and community sustainability? A proper assessment requires that policy-makers and policy advocates step outside the realm of what plays well in political theater and take a long, hard look at the most feasible strategies.
For the most part, the fight for a minimum wage increase speaks to the frustration of stagnant wage rates, an increasing cost of living, and the ever-widening gap between CEO pay and that of a company’s employees (usually characteristic of large corporations). Many are frustrated by the fact that taxpayers essentially subsidize low-wage workers at such companies as Wal-Mart, especially after it was reported that a significant percentage of Wal-Mart employees received government assistance. In essence, the government subsidizes Wal-Mart by making up the difference for employees who work (often full-time), but are unable to rise above the poverty line.
However, the minimum wage debate has taken place largely on the extremes – on one side, McDonald’s employees Fighting for $15, and on the other side of the spectrum are Wal-Mart CEOs leading one of the biggest and most profitable companies in the world. I argue that the true heart of the debate rests on the impact on small businesses, a city’s ability to influence business attraction, and workforce development that values all communities.
In Chicago, small businesses are a critical part of the economy. The Chicago Metropolitan Area alone has more than 230,000 small businesses when small businesses are defined as having 1-99 employees. Microbusinesses are businesses with 1-9 employees. Based on 2010 Census Bureau data, 76% of those 230,000 small businesses are microbusinesses (roughly 175,000). And according to the Illinois Department of Employment Security, businesses with 1-4 employees make up the majority of all small businesses in the Chicago area. These are the mom-&-pop stores, the sole proprietorships and enterprises that are more likely to be locally owned and operated.
Small businesses are probably the most important contributor to local economies. In communities, small business owners have proven more willing to hire from the community in which they reside. They are also more willing to hire individuals that are harder to employ such as ex-offenders, high-school dropouts, etc. Businesses like Brown Sugar Bakery on Chicago’s South Side, pride themselves on hiring people in high school and the role they have played in launching them into adulthood. Money from small businesses tends to circulate within the community more times before leaving the community. Moreover, small business owners are often important community partners – helping to lead on issues of safety, economic development, and community improvement.
A minimum wage increase would undoubtedly hurt the growth of these small businesses – especially those in more challenged communities where both individuals and businesses alike struggle to survive. They already contend with unwieldy licensing regulations from the city, competition from larger franchises, difficulty accessing start-up and operational capital, and the ever-growing threat that big box retailers pose to their survival. Despite these challenges, some small businesses pay higher than minimum to their employees. But for those who do not, a mandatory wage increase would only hurt the prospects for growth that are so crucial to the quality of life in local communities.
This does not, however, mean that there is no recourse for wage increase advocacy. At the municipal policy level, it becomes an issue of principle and a question of how cities can value the entire eco-system of businesses that constitute the economic landscape.
Municipal governments can decide how strongly they want the business ecosystem to reflect the values and priorities that undergird their leadership. For example, if municipal leadership supports (as a matter of values) a living wage or a minimum wage increase, generous pension benefits, and a bottom line that values profit as well as social impact, they can use their influence to facilitate the proliferation of companies that reflect those values. Municipalities do it all the time. Chicago’s Mayor, largely through World Business Chicago, has focused on attracting tech companies from around the world because of its desire to establish itself as a tech-hub. This has come by way of financial investments in entities like 1871, new bikelanes to attract Google employees, and the like.
In the same way, the mayor and the city’s economic development arm can use that influence to make values-based decisions on which companies to attract. A good example of an attractive company is WinCo, a 40 year old Texas-based employee-owned company where employee stockholders have seen their Employee Stock Ownership Plan (Pension Plan) grow at a 21.51% annual compound growth rate. This has created an extremely dedicated workforce that is able to support themselves and their families on their Winco wages. Winco is now operating 93 employee-owned stores in seven states with nearly 15,000 employees and the company continues to grow by opening new stores every year. Costco, Trader Joe’s and Quick Trip are other examples of chains that value employees through solid pay and benefits plans. The key is to support the proliferation of these businesses through targeted marketing and outreach efforts that attract them to the city. This is where financial incentives and tax benefits for certain businesses would be effective. This strategy would bring in more employers that we do want (those that bring a significant number of jobs, pay higher wages, and are interested in investing in Chicago beyond just satisfying their bottom line). This strategy also acknowledges that while there are some companies for whose values we do not agree (i.e. Wal-Mart) we do not repel them because we understand that they too have a place in the city’s business eco-system. (Because the reality is that low wages are better than no wages, and low-priced goods are often the only option for those at the bottom rung of the socio-economic ladder).
Stephanie Hart owns Brown Sugar Bakery in Greater Grand Crossing on Chicago’s South Side.
In addition to supporting small businesses and values-based business attraction and retention strategy, the best long-term strategy to reduce poverty and encourage economic growth is to ensure that individuals have access (and take advantage of) workforce training programs that place them in high value add sectors in the economy. That is the municipality’s primary responsibility as a high quality labor force is one of the strongest incentives for attracting companies. Minimum wage jobs typically come with low or no skill requirements. There exist few of the barriers to entry such as education level, certification level, and years of experience that are required in higher-skilled positions, which explains why wages are low. However, there are jobs available in the economy, particularly in high value sectors like manufacturing, health care, and information technology. Many of these sectors are experiencing a shortage of individuals trained with the skill-sets and holding the necessary certifications needed to fill these jobs. A lot of times, these jobs do not require a college degree or even community college degree, but they do require sector-specific training.
Municipal leadership must prioritize comprehensive workforce training initiatives that start at the secondary school level and prepare individuals for college and/or careers. Students should be graduating from high school with relevant job skills that will allow them to obtain jobs upon graduation, increase their educational level in community colleges, move on to a 4-year institution, or do a combination of two or more of the three. We must also do a better job of providing training opportunities for individuals in that critical age of 18-25 as well as those with a criminal background so that they are able to re-enter the workforce and contribute to the local economy. And municipalities must invest in developing these workforce opportunities and recruitment efforts in the neighborhoods. For that, a municipality must value all of its residents – not just those who happen to live in the downtown areas.
After all, employed individuals are tax payers and the city’s priority should be expanding its tax base. By investing in workforce training and prioritizing attraction and investment of high quality, socially conscious companies through values-based strategies, to all of our communities, we demonstrate a commitment to ensuring that all workers are respected and that individuals, families and communities thrive.