Herman: John L. Herman Jr., Author

Stupid is as Stupid Does...

American business is a costly endeavor. If you are a manufacturer, a restaurant, a service company or any other kind of enterprise the cost of operating is the single greatest misunderstood concept.

I have witnessed thousands of owners underestimate the cost of parts, the cost of operations, not account for how long it will take to complete a task, and most importantly of all, the cost of labor. The cost of labor is why we shipped almost all of our manufacturing overseas. Labor has a component that we know costs a certain amount per hour, and we try to calculate how many hours we have to employ someone to get the job done. If you own a retail store you must “man the shop” for every hour you are open…and some leases, such as at a Mall will make you be open for many hours when you will do no sales.

Now it doesn’t take a rocket scientist to figure out that many businesses operate with “minimum wage” employees. That means they have to hire people willing to work for the lowest allowable wage to stay alive as a business. Since people seem to be in debt over their eyeballs there are lots of people needing and wanting jobs. Even minimum wage jobs. But the employers are struggling to stay afloat.

Business owners would love to have people work for free, but we know that is not possible. But given the fact that so many companies are losing money, with 700,000 going out of business every year (and those are during the years of a strong economy), one can only conclude that those hourly people are lucky to have jobs and are willing to work for that pay. In America every worker has the choice to say no to any job if they feel the pay is not enough. Many of those workers will be out their jobs soon. You see, “we the people” have raised the minimum wage by forty cents an hour because we feel people need that standard of pay to be fair. Is it fair that we just put tens of thousands of those minimum wage workers out of work by telling employers they must increase their costs by forty cents an hour? If the owner has 100 hours of paid hours per week of minimum wage employees then that owners costs go up by four hundred dollars starting this week. That is twenty thousand dollars of extra cost in the next twelve months. Out of the owners pocket.

Please tell me how you explain this to the workers who will lose their jobs soon because while they would work gladly for today’s minimum wage, they will be fired because owners can’t pay the new higher cost? This is yet another case of stupidity where government intervention to protect us actually destroys us. Listen, the marketplace already has an enormous “underground” work force that gets paid cash with no taxes taken out and has people traveling thousands of miles from foreign countries just to get those jobs. The owners offer an opportunity to work under that condition and people line up to do the work. We keep driving ourselves further into the ground by trying to be a Free Market, capitalist system…with enormous interference from our “do gooder” government. In truth, our government pays many people not to work, or at least they make the incentive be to stay on support from the masses rather than take those jobs where you have to actually work hard to earn your pay.

The cost of operating every business that uses minimum wage employees just went skyrocketing up…as the economy squeezes more and more of them out of business. Kind of like putting taxes on gasoline and then finding out later those taxes help make gas cost over four dollars a gallon. Oops. But that is for another day.

• Posted: 23 July 2008
• Comments: 2
• Category: Running a business

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