Businesses Facing a Minimum-Wage Squeeze Will Cut Back

A recent editorial in The Plain Dealer praises the timing on the state’s Jan. 1 minimum-wage hike (“A wage boost in Ohio,” Thursday). But for the state’s low-margin businesses, like restaurants and grocery stores, there’s no such thing as a good time for an increase in labor costs.

For an employer with 20 employees earning the minimum, the recent wage hike translates to more than $6,200 a year in additional labor costs. But that’s not the end of it: A business that keeps just 3 cents in profit for each dollar in sales — as most grocery stores do — has to sell more than $300,000 a year in additional merchandise just to make $6,200 in profit.

Raising prices isn’t an option, because forcing higher prices on cash-strapped customers means fewer sales. Given those economic realities, it’s not hard to understand why a minimum-wage increase — even one that seems relatively small per hour — forces businesses to cut back and provide the same service with fewer employees.

Michael Saltsman, Washington, D.C.

Saltsman is research director for the Employment Policies Institute.