Posts Tagged ‘Small business’

High minimum wage and small-biz job growth

May 15, 2014

Growth in small-business jobs is greatest in Washington state, which has the highest state minimum wage, and in San Francisco, which has the highest urban minimum wage.

That conclusion is based on the Paychex | IHS Small Business Job Index, a survey of more than 350,000 small-business clients of Paychex, a payroll processing firm, in partnership with IHS, a consulting firm.


U.S. Small Business Jobs Index

The federal minimum wage is $7.25 an hour.  Overall, the United States had a Small Business Job Index of 101.26, which meant that the number of small-business jobs was up 1.26 percent from 2004, when the survey began.

Washington state, with a minimum wage of $9.32 an hour, had a Job Index of 103.51 and San Francisco, with a minimum of $10.74 an hour, had a Job Index of 104.02.

During the past 12 months, small-business jobs increased by 2.2 percent in Washington state.  Seattle’s small-business jobs grew by 2.66 percent, the highest 12-month growth rate among large U.S. cities.  Small-business jobs in San Francisco’s increased 1.13 percent during the same period.

Maybe this job growth is due to a higher minimum wage giving workers more money to spend at local small businesses.  Maybe it is for reasons completely unrelated to minimum wage.

But it provides an answer to the argument of many economists and the Congressional Budget Office that any increase in the minimum wage automatically results in a loss of small-business jobs.


Paychex | IHS Small Business Jobs Index.   Tables of data.

Paychex | IHS Small Business Jobs Index Increases to 101.26 in April.  A press release.

Washington state defies minimum wage logic by Katie Loboso for CNNMoney.  Hat tip to Barry Ritholtz.

Why franchisees should organize

March 19, 2014

I’ve written about low wages and poor working conditions at fast-food restaurant chains, but the fact is that a humane business owner who is a franchisee may not be in a position to treat employees humanely.

Franchisers of fast-food restaurants impose strict controls on franchisees, including the prices that they charge.

So if McDonald’s (to take a hypothetical example) says the price of a double cheeseburger is a dollar, and it costs more than a dollar to make the double cheeseburger, the “owner” of the individual McDonald’s restaurant loses money.

I put “owner” in scare quotes because a franchisee does not have the self-determination of a true owner.  Under a truly independent business owner, the franchisee is not free to raise or lower prices in response to supply and demand.

The effect of unionization of fast-food workers or a higher minimum wage will be to squeeze franchisees while the effects on franchisers at the top of the economic food chain will be minor and indirect.

The answer, as Martin Longman wrote in the Washington Monthly, is for franchisees to unionize to protect their own interests.   As Longman pointed out, franchisees typically pay thousands of dollars just for the right to the franchise, basic business decisions such as prices are made for them, and they often have to buy basic supplies from suppliers designated by the franchiser.  They are in much the same situation as sharecroppers in the Old South in an earlier era, and have just as little ownership rights.

Everybody who is in a position to be squeezed by giant corporations — employee, franchisees, suppliers — has a right to organize collectively to equalize the bargaining power.   It is not in the interest of franchisees and suppliers to be shock absorbers between these giant corporations and the workers who make their profits possible.

If franchisees organize, their organization would of course not be called a “union” [1].  It would be called an “association” or “federation” or something like that.  But the purpose would be the same.


Labor unions and small business, unite!

July 11, 2011

The strongest and most dependable supporter of the Democratic Party is the AFL-CIO.   The strongest and most dependable supporter of the Republican Party is the National Federation of Independent Business.  Yet the top elected leaders of both political parties are serve the interests of monopolistic corporations which are driving down the incomes of working people and small business owners alike.

Barry C. Lynn, in an interesting article in The Washington Monthly, wrote that the time has come for a political alliance of labor unions and small business owners against the big corporations that are squeezing them both.

Last August, on a blazing-hot Nebraska evening, I sat in a cool hotel bar in downtown Omaha and listened as a team of Dockers-clad union organizers joked, drank, and argued their way into an alliance with a group of southern and western ranchers.  The organizers, from the United Food and Commercial Workers (UFCW), made a simple argument: Meat-packing houses like JBS and Smithfield— their already immense power swelled from years of mergers—are using their dominance of cattle markets to hammer down what they pay for beef and for in-house unionized meatcutters.  So rather than “scrap over nickels,” perhaps the ranchers and workers should lock arms and fight for bigger stakes.

Cowboys and labor? Plotting together? Polo shirt and bolo tie? …  Half a year on, it’s evident that the alliance was no momentary fling, no mere “enemy of my enemy” excuse to clink a few beer bottles before stumbling back to opposite ends of the political corral. When the Justice Department held a series of hearings last year on concentration in agriculture markets, including cattle, the UFCW helped to pack the room for the cattlemen’s testimony, one of the only times in recent decades that an American labor union has promoted stronger enforcement of anti-monopoly law.

And in exchange? While in that room, the UFCW got a chance to make the case that the trustbusters should take on Walmart.  The union views the retailing goliath as the main force smashing down the wages and benefits of the retail workers the union represents.  More to the point, the union has also come to view Walmart as the real power driving the big meatpackers’ assault on both cattlemen and packinghouse workers. 

The basic thinking here is that Walmart now controls such a giant swath of the U.S. marketplace that it can dictate prices even to the biggest of suppliers, which leaves less money in the system for the people who actually produce goods and provide labor.

via The Real Enemy of Unions.

Most small business owners regard labor unions as the enemy and big businesses such as Walmart as larger versions of themselves.  Labor unions historically have favored big business because they think it is easier to organize workers in one giant corporation than many small businesses.  But Walmart shows the falsity of both ideas.  Walmart’s monopoly power enables it to dictate low prices to suppliers and low wages to workers.

There is an inherent conflict between the interests of employers and employees, no matter whether the employer is a large business, a small business, a non-profit organization or a government.  But in the United States in the present era, workers and small-business owners have in common that their fates are tied to the future of the United States and to the localities in which they live.  The largest corporations and banks can operate anywhere in the world.  They don’t need the United States.  Workers and small business owners do.

Clyde Prestowitz, who was U.S. trade negotiator in the Reagan administration, once illustrated this point with a story of how his son invited him to invest in a snow removal company.  Why a snow removal company? he asked.   “Dad,” the son said, “they can’t move the snow to India.”


Small business and the Great Recession

May 31, 2011

Click to enlarge or open

Click to enlarge or open

In the long run, the health of the U.S. economy depends on small and newly-created business.  Not only to small businesses create a large fraction of new jobs (often a majority of new jobs, if you don’t count jobs lost through small business failure), but small businesses are the seedlings that grow into future large businesses.  Every Fortune 500 company was once a small start-up.  And when new technologies and businesses emerge, it is seldom the Fortune 500 companies that take the lead.  IBM Corp. was not the leader in personal computers, nor Eastman Kodak Co. in digital photography.

These two charts from the Bureau of Labor Statistics show the decline in the number of small-business startups and in small business hiring during the past few years.  The decline actually began before the official start of the Great Recession, and continued after its official end.

The Federal Reserve Board’s “quantitative easing” is intended to help small business.  By making more money available to banks, and by driving interest rates down nearly to zero, the board intends to make it easier to finance business startups and business expansion.

The charts only run through March, 2010, so they don’t provide any information on how successful the Fed’s effort is.  But it doesn’t seem to have had much effect so far.  The big banks aren’t investing in the real economy.  Debt-ridden consumers have every reason to cut back on spending and pay down existing debt, rather than take out new loans.  Businesses can’t be successful unless they have customers, and, in the present economic climate, it is hard to see where new customers will come from.  Unless something changes, the Great Recession will be self-perpetuating.


What worries small business owners the most

November 29, 2010

What worries small business owners the most is not government regulation, not high taxes, not the cost of wages and benefits.  What worries small business owners the most is lack of sales.

Here are the figures, as compiled by the National Federation of Independent Business.