Sunday, November 22, 2015

How Will Your Association Cope with $15 an Hour Wages?

A possible new $15 an hour minimum federal wage – or a huge increase in the minimum wage – presents major challenges for associations and nonprofits.

The Labor Movement has been aggressively promoting increasing the federal minimum wage to $15 an hour.

No matter what happens, the minimum wage increase will impact associations and association finances.

Experience Anecdote

Early in my ownership of an association management company, our receptionist came to me during an earlier move to increase the state’s minimum wage by $1 an hour. I was paying her a few dollars an hour more than the existing wage. “Steve,” she said, “If the minimum wage passes, I want a $1 a hour increase in my salary.”

It was then I realized that increasing the minimum wage increases wages up and down the line. And, it was then I realized I needed to budget for general wage increases for everyone any time the minimum wage was increased.

The Challenge for Associations

Assuming this case is universal, the question for associations and nonprofits becomes:
  • How do we budget for across-the-board wage increases? 
  • Where do we get the funds to support such increases?
  • Will members accept the higher dues and increased fees needed to balance budgets?

For Profits Can Automate

Many businesses find ways to automate to “contain” the impact of wage increases. Throughout history the laws of economics have led to automation anytime labor costs increase to the point of making machines more economical. This can happen again. Here are some examples:

Panera Bread ordering kiosks
During recent visits to Panera Bread Company shops, I’ve noticed they have installed “customer-operated ordering machines.” Right now, they call them “fast line.” But, I’m pretty sure that when/if the minimum wage increases, Panera – and other fast food restaurants – will replace fast food workers with customer-operated “cash registers.”


Robots can replace workers whose higher wages now make increased automation more economic.

New cotton picker (right) eliminates the need for this
equipment (left) and its 3 operators
I was on a cotton farm last week as an “old” cotton picker picked cotton. While a vast improvement (in terms of efficiency) over people cotton pickers, this cotton picker requires additional machines and people to operate. As shown in the photo, it requires a tractor and cotton wagon; another tractor and cotton “baler” and “compaction machine.” The farmer told me he is considering buying a new, more advanced cotton picker which picks and bales the cotton. The new machine eliminates the need for the two tractors, the compactor and the wagons and the people who work them.

Associations are a people-intensive business. Most associations and nonprofits have automated key functions (computers, databases, switchboards, etc.).

At this time, associations and nonprofits seem to have fewer (if any) options to automate. If that assumption is true, how do they pay for higher labor costs associated with a higher minimum wage?

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