With governments pushing to increase the basic minimum wage to $15 by 2021 or earlier, many businesses are not only feeling challenged by the news, they are wondering if they will have to shut down.  While there are some businesses who have a high percentage of minimum wage employees,  CNN recently reported 91% of small business employees already earn more than minimum wage.  So why all of the fuss?

To some extent, it is the squeaky wheel that gets the attention. Some businesses are legitimately hurt by this change and will have to shut down. Whether it is because those businesses are not well-run or have a business model that runs on the edge of profitability, those are the stories the media goes looking for. Being the owner of a small business myself, I understand the sleepless nights wondering where the next payroll is going to come from. Even businesses only mildly affected by the change are often unhappy about giving up what is potentially a large portion of their annual profit. $100,000 of increased costs for a company with $5,000,000 in sales might sound like a small deal when it only represents 2% of annual sales, but when compared to an annual profit of $500,000, it represents a 20% decrease. For some, the change is enough to tip them over into negative territory.

So, how do you get those lost profits and more back?  The answer is not simply cost management….it is increasing productivity.

Here are five ways an increase in minimum wages will improve your productivity:

1. $15 will attract a better pool of prospective employees 

A $5 an hour raise from $10 is a big increase.  Wage levels above $15 won’t have gone up by 50% so you should be able to find better quality employees for that wage.  With better employees comes better productivity.

2. You should experience less staff turnover 

It may be unlikely you personally would want to work for $15 per hour but there are lots of people who would see a major increase in their standard of living.  It’s an older study now but the Economic Policy Institute released a study in 1999 noting that nearly 40% of minimum wage earners in the United States are working parents.  Nearly 33% are married couples raising children.  These people will appreciate the raise and won’t be as likely to look for a new job for another $1 an hour.  That means lower recruiting costs and higher productivity.

3. Your staff will be less stressed 

More money may not bring happiness but a reasonable amount will help your staff sleep at night once there is hope they can cope with their bills.  They should naturally work more effectively.  More productivity.

4. $15 might be enough to hire more specialized staff  

In most businesses, specialized staff are in short supply. $15 might just be high enough to attract and keep staff needed in the specialized positions in your business.  More specialization, more productivity.

5. Higher customer satisfaction 

McDonald’s sales have been on the increase since minimum wages were increased to $10 an hour after Steve Easterbrook, the new CEO, came on board.  One of the benefits he noted was the increase in customer satisfaction scores. Happier staff, happier customers, more productivity.


These points might seem like minor benefits but all of them, when put together, should be more than enough to offset a 50% wage increase for your employees making less than $15 per hour.
To truly gain even more productivity, you need to focus on innovation.  At the heart of most small businesses beats an accounting or ERP system.  Choosing the right solution means a system that allows staff to process a much higher volume of transactions, allowing the company to minimize staffing costs. Increase the productivity of your staff to offset the higher costs and gain more than the costs of higher wages.  A high performance system allows staff to concentrate on “value add” activities instead of morale-sapping data entry.  Having to enter data into two or more systems can’t be good for the psyche!

Many of those lower cost employees live and breathe mobile devices. Use that interest and skillset to allow them to be productive anywhere and anytime. $15 per hour might just be enough to get those millennials you need into the workforce.

For information on Microsoft Dynamics NAV and Dynamics 365, systems offering these benefits and more, contact us at 877.777.7764 ext 105 or reach out to us online.