As we head into the busy season, I see lots of job applicants in the lobby when visiting door and window manufacturers. In some areas, the turnout is quite strong and the candidates look good. But in many areas, manufacturers are still complaining about the shortage of hiring and keeping skilled labor on the factory floor.

Many of the jobs in a window factory are quite repetitious and the plant environments are hot and dusty, which leads to boredom, exhaustion and high attrition rates. Also, in many areas, keeping a drug-free environment also means alarmingly high turnover rates. After the random drug testing is administered, many employers suddenly find they have quite a few employees to replace.

So with skilled employees in short supply and attrition rates running at all-time high levels, is it a good idea to raise the federal minimum age? As we head into the presidential election, there is a fair amount of debate about raising the federal minimum wage rate to $12 or even $15 per hour.

Facing off against rival candidate Bernie Sanders on CNN in April, Hillary Clinton emphatically endorsed the idea of a national $15 minimum. Asked if she would, as president, sign a bill legislating a $15 federal minimum, Clinton said, “Of course I would.”

Some states are already taking action to boost the minimum wage. Such legislation to boost it to $15 an hour was recently approved in New York and California. These new wage laws were passed to address concerns about income inequality and wage stagnation.

The debates have raised quite a bit of controversy. Some economists warn that this legislation will backfire on the workforce and destroy opportunities for low-skilled job seekers. On the flip side, proponents of a higher minimum wage claim that for most industries, it won’t destroy these opportunities. They say higher wages will result in a larger pool of interested and skilled candidates. The higher wages would also be paid by competitors, so it would have minimal impact on the employer.

Here are their arguments for it:

  1. Low-wage workers will be paid more and their standard of living will improve;
  2. More money will stay in the local economy as opposed to being paid to stockholders, most of whom reside outside the area; and
  3. The low-wage workers who receive the pay increase are likely to spend all of the money. Households with incomes less than $40K spend all of their money as opposed to those with incomes in excess of $70K who spend only 60 percent to 65 percent of their pre-tax income. Therefore, the argument here is that the higher minimum wage creates a local economic stimulus.

And arguments against it say that while larger businesses may be able to afford to pay their employees a higher minimum wage, the smaller businesses cannot and will be forced to lay off workers and possibly go out of business.

For any business, raising wages to the point that a business is paying employees more than what their services are worth will result in artificially high prices. The practice would simply force businesses to redistribute wealth. The business will suffer in the long term because it will have less to invest in new technology and research.

Consumers are only willing to pay for goods and services when they value them more than their own money. Therefore, the economy will suffer. And businesses that can do so will begin replacing employees with automation, resulting in job losses.

So where do you think we should go with the minimum wage? As a manufacturer, do you feel it will help attract more interested and hard-working employees, or do you see it as a burden on your business? Is now the time to invest in automation or to embrace change and hope for the best?

1 Comment

  1. no matter what labor rate, automation is a must. it does not matter what the pay rate is, the call-offs are a killer to manufacturers with a high labor content. paying employees what they are worth is definitely correct. skilled employees are getting paid well. unskilled need to prove themselves and grow with the skills they learn. moving minimum wage from 7.25 to 15,- without attaching requirements will just inflate the cost of all products and services.

Leave a Reply

Your email address will not be published. Required fields are marked *