How Doubling the Minimum Wage Would Hurt Retailers

Congress considering raising federal rate from $7.25 to $15 by 2025
Person holds sign demanding $15 minimum wage
Photograph: Shutterstock

LAKEVILLE, Minn. — Congress is considering the Raise the Wage Act, H.R. 603, which would raise the federal minimum wage from $7.25 to $15 in stages.

Increases would begin at $9.50 in 2021 and rise to $11 in 2022, $12.50 in 2023, $14 in 2024 and $15 in 2025, with built-in increases based on wage inflation from 2026 on. The bill would also by 2025 do away with the lower 90-day training wage for inexperienced workers under the age of 20 years old.

Both policies will negatively affect small retail businesses. NATO has made its concerns known to Congress.

Retailers know what economists have proven for decades: minimum wage laws mean job losses. When the minimum wage goes up, all wages go up. Raising retailers’ largest expense after inventory means they must either raise prices or reduce hours. Small employers do not have the financial ability to absorb price increases.

In addition, because tobacco retailers are selling age-restricted products under face-to-face transaction mandates by federal, state and local governments, they cannot automate sales. Tobacco retailers need responsible, trained employees, to verify age, and adequate staffing levels must therefore be maintained.

With little ability to raise prices or automate, retailers are left with the alternatives of reducing employee hours on a reduced schedule or closing their store. Store closures by small businesses will most likely occur in those communities that can least afford to lose them. These communities may lose their only source of the many consumer staples, like groceries, beverages, snacks and gasoline, which many tobacco retailers provide.

These businesses that the government has deemed to be “essential” during the COVID-19 pandemic and lockdown would now be facing another barrier to profitability. Aside from the results of the pandemic, tobacco retailers have also faced federal, state and local actions that have reduced their customer base, by making the minimum legal sales age 21, and removed hundreds of products from retailers’ shelves by making many flavored vaping products illegal and removing other products for which manufacturers did not apply for FDA authorization to continue selling.

While all these things were negatively impacting legitimate retailers, demand for the products they sold did not decrease. That demand became more likely to be served by the already existing illicit sellers of the products, sellers who do not care about their customers’ ages, much less minimum wages.

Doing away with the under 21 training wage is not sensible policy, either. Many workers in tobacco outlets are under 21 and in their first job. They need training, not just on responsibly selling tobacco and other products, but on being reliable, showing up on time, providing good customer service, handling point-of-sale transactions and so on. Tobacco retailers frequently hire these young people, and train them under the supervision of a skilled, 21-and-over adult, in general work skills and the proper way to handle tobacco product sales to avoid sales to underage persons.

Doing away with the temporary youth wage means small businesses working on thin margins will pass over these younger employees in favor of already skilled employees who do not need this training.

Other businesses may be able to telecommute or work remotely but retailers need employees in their stores. Retailers compete for employees in their area, which reflects the cost of living. It makes no sense that the minimum wage in a lower cost small town would be the same as the wage in an expensive urban area.

Retailers should consider contacting their Congressional representatives to tell them what they think about the Raise the Wage Act.

Thomas A. Briant is the executive director of NATO, a tobacco retailing association based in Lakeville, Minn. Reach him at info@natocentral.org.

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