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Fast-food workers and supporters organized by the Service Employees International Union (SEIU) protest outside of a Burger King Worldwide Inc. restaurant in Los Angeles, California, U.S., on Thursday, Aug. 29, 2013. California lawmakers and unions reached a tentative deal on Saturday that would raise the state's minimum wage to $15 an hour. Patrick T. Fallon/Bloomberg via Getty Images

Column: If your business can’t pay a living wage, it shouldn’t exist

Nick Corcodilos started headhunting in Silicon Valley in 1979 and has answered over 30,000 questions from the Ask The Headhunter community.

In this special Making Sen$e edition of Ask The Headhunter, Nick shares insider advice and contrarian methods about winning and keeping the right job, on one condition: that you, dear Making Sense reader, send Nick your questions about your personal challenges with job hunting, interviewing, networking, resumes, job boards or salary negotiations. No guarantees — just a promise to do his best to offer useful advice.

Question: I operate three restaurants. It’s getting harder and harder to hire workers. People just don’t want to do this kind of work anymore, but for young people it’s actually a good way to learn good work habits. We do a lot to train new employees.

I’ve tried local newspaper ads, online job postings, and I even sent jobs to local college career offices. I know you’ll ask how much we pay, and it’s not the $15 an hour they’re trying to raise the minimum wage to. But it’s good pay — $8.75 an hour.

I can guess what you’ll say: That’s why the minimum wage should be raised, so people will take these jobs. But I can’t afford it. It would put small businesses like mine out of business. A $15 minimum wage is counter-productive because it will price low-level workers out of jobs altogether.

What else can I do to fill these jobs?

Nick Corcodilos: You’re not the only restaurant owner facing a supply and demand problem with labor. And it’s not just the food service industry that’s facing it. Employers across industries have a big supply of jobs but labor is demanding more pay!

Economists have long debated whether raising the minimum wage is good or bad for the economy at large. Studies on the issue have had mixed results.

But when it comes to how individual businesses should decide what to pay, my economic logic is simple. You — and many employers — have already discovered it, even if you all pretend otherwise: Nobody’s going to work for you because it costs more to live than the peanuts you’re paying.

You cannot — or you refuse to — pay fair-market compensation. That’s why you can’t hire the workers you need, no matter what your rationalization is. As I explained last week, the “talent shortage” is a creation of employers’ own making.

Fair-market compensation is an amount people need for shelter, food, transportation and other basics of life. That’s more than $70 a day where most people live.

I’m not going to mince words. If your business can’t afford to pay a minimum $15 an hour wage, your business cannot afford to exist. You should close it down and let a better-managed competitor hire your employees and service your customers.

Many will disagree with me vehemently, but I’ll try to explain why I say this. (See also The Job Monopoly: How companies keep pay low.)

A shortage of workers who will work for peanuts

A recent Bloomberg Businessweek article highlights a common trend: “Restaurants Are Scrambling for Cheap Labor in 2019.

Echoing you, the CEO of Applebee’s told Bloomberg, “It’s hard to find quality folks to work in the restaurants.”

But many restaurants cited in that article “are loath to raise wages, which must be offset by higher menu prices. They count on ample pools of workers willing to accept modest pay.”

Critics of the $15 wage point out that there’s a difference between older workers who need to make a living wage and, for example, high school students who live with their parents and work summers to earn spending money. That’s a very real distinction. But what happens when an adult with a family to support applies for the same job at the seasonal restaurant that a high schooler does? Now we’re facing a discrimination problem that’s tangled with wage law. Should the employer be allowed to ignore the mother with two kids and hire a student for less money?

Besides, a Pew Research Center study that Bloomberg cites, shows us there’s a shortage of young workers, not only older ones.

Only 19 percent of 15- to 17-year-olds worked in 2018, compared with 30 percent of people of the same age in 2002 and 48 percent in 1968. The drop continued among slightly older Americans. Fifty-eight percent of 18- to 21-year-olds worked in 2018 compared to 72 percent in 2002 and 80 percent in 1968.

There are a number of reasons why fewer teenagers are working. There are fewer entry-level jobs, school years are longer, more students are enrolled in classes over the summer and teens are doing community service or taking internships instead of working. And perhaps today’s youth is too smart to accept a restauranteur’s rationalization that high school kids don’t deserve the pay that adults with mortgages do.

That means employers are being forced to take extra measures to attract their share of a smaller “willing” labor pool.

How companies are trying to attract workers

You mentioned what you’re doing to find workers — posting jobs in different places. Let’s look at the “strategies” restaurants in that article have developed “to recruit and retain young workers” in what they complain is a very tight labor market:

  • Throw “hiring parties with free nacho fries to draw prospects”
  • Hand out “recruiting cards that say, ‘We are looking for great talent like you!’”
  • Offering “an employee mobile app” that lets workers swap shifts easily

Gimme a break! What do free nachos have to do with convincing people to accept low wages? This is someone’s idea of “strategy” for filling jobs?

A few companies in the Bloomberg story are actually giving away money in the form of bonuses, but a one-time bonus is the oldest compensation trick in the book. It’s a one-time expense a company can write off. It’s a far cry from permanently higher wages. (See Why employers should make higher job offers.)

What a better-managed business looked like

Companies that say they cannot stay in business if they are forced to raise wages might take a lesson from their counterparts who are already paying upwards of $15 per hour.

Ron Rivers, founder and CEO of the homebrew supply company Love2brew, writes in a New Jersey Star Ledger op-ed that his company hasn’t had to raise prices on its 1,500 products to cover higher wages. He implies he will hire that talent, grow his business without sacrificing product quality or customer service — and the economy will be stronger as a result.

“My team entered the home-brew industry with an understanding that a high level of service and customer support would set us apart from our competition,” he wrote.

Rivers argues that when employees are paid better wages, they provide better service. Customers notice, he said, and keep coming back.

Dear Readers: Okay, it’s your turn: Who really needs a $15 minimum wage? Who can live and prosper without it? Can businesses hire the workers they need, if they keep insisting on paying less? Would it really be better if businesses just went out of business if they can’t pay $15 an hour?

Nick Corcodilos invites Making Sense readers to subscribe to his free weekly Ask The Headhunter© Newsletter. His in-depth “how to” PDF books are available on his website: “How to Work With Headhunters…and how to make headhunters work for you,” “Keep Your Salary Under Wraps,” “How Can I Change Careers?” and “Fearless Job Hunting.”

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