Viewpoint: Despite political rhetoric, data shows $15 will hurt local families
By Bryan Shupe
Currently still in the midst of a pandemic, our families and family-owned businesses are struggling to survive. National campaigns have told us, without listening to local needs of our people or businesses, that the economy will prosper if only our local businesses would pay people more. Interesting enough, large multi-national corporations agree with that sentiment and are helping to drive $15 per hour into permanent law for Delaware businesses.
The national agenda of $15 per hour for minimum wage has gained attraction without bringing into the conversation both the positive and negative impacts that such a comprehensive policy that directs both public and private markets should include. Political agendas are being pushed instead of conversations in our communities of how to help serve residents with long-term sustainable solutions that lift people out of generational poverty.
In contrast to what proponents say about the benefits of raising minimum wage to $15, the most recent study from the Congressional Budget Office, a nonpartisan office that independently analyses budgetary and economic issues to support the Congressional budget process, states that 1.4 million workers will lose their jobs with only .9 million receiving wage increases, as a result of that specific raise increase. There will also be an increase to government spending, which means more demand on taxpayer money.
Large corporations support $15 mandate to kill competition
I do not pretend to know the intentions of any lawmaker in the State of Delaware and assume that some supporters of raising the minimum wage to $15 believe the legislation will simply raise earnings for families without changing the rest of our economy. In recent weeks several State Senators and Representatives have said that businesses like Walmart and Amazon can afford to pay people $15 per hour. That statement is true and is exactly why big corporations are in support of this bill and putting their money behind the efforts through newspaper and social media campaigns in Delaware.
Any business understands that to be successful they need to outperform their competition. But what big corporations here in Delaware and around the country have undertaken is disingenuous tactics to kill current small businesses by demanding that every business meet their standards, which only they can afford through their profits, that account for hundreds of billions of dollars in the U.S. economy each year. To take this even further, they want to create these standards into law permanently. This will create a prohibition on future competition as it becomes too expensive for any individual to create a business from the ground up as they did decades ago when they were once small businesses, and the laws were different.
According to Delaware’s Small Business Divisions’ Fiscal Year 2019 Annual Report, small businesses accounted for 98 percent of businesses in Delaware and employed 55 percent of Delaware’s workforce. Should the State of Delaware pass $15 minimum wage and direct private businesses to pay that rate, the 98 percent of businesses in Delaware will walk through the same process in an attempt to retain the 55 percent of Delaware’s workforce. Small businesses will decide whether to raise prices of goods and services to consumers, decrease employees or businesses hours or close their doors. Unlike the government, small businesses cannot tell their consumers to pay more for products like government does with taxes. They must see if their customers are open to paying the increased prices. This will be done in an effort to stay open and ensure that employees receive checks. There is no huge reserves of money for small businesses to fall back on to put this forced standard into practice, it must come from the current bottom line.
Unlike big businesses, small business cannot automate services or rely on shareholders to create profits to use towards higher payroll expenses. It must come from direct sales from their customers or cutting services. This is not a scare tactic but real, difficult decisions that every small business across Delaware communities will be making at a time when many of them are still living off subsidies from federal and local government entities to survive. Both government and big corporations will be exempt from having to make these decisions of course, due to the unrealistic resources that they have at their fingertips. Although the $15 minimum wage bill has passed the Delaware State Senate and is in House Committee, local lawmakers have failed to address how they will pay for increases to the State’s bottom line and impacts on government services.
It is simple, small businesses cannot compete financially with big corporations. Big corporations have dominated the market by cornering the ability to price products below small businesses. Now through legislation they will control competition through line-item accounting by setting controls on payroll. This is exactly the approach of large corporations in today’s economic environment. They made billions of dollars off the public during the pandemic when small businesses were closed, and they continue to do so. Now, they see their chance to eliminate the competition by making it unaffordable to run a family-owned or small business. Employing over half of our workforce in Delaware, small businesses struggling will equal more Delaware families struggling. With only two percent of Delaware’s workers being employed by big business, where will local individuals find opportunities to support their families.
Encourage small business growth
The pandemic has decimated our small business community in the state of Delaware. First through government closures that aimed to reduce the spread of the COVID-19 virus and then through the continued restrictions on industries such as local restaurants that still are not at full capacity. Because of these limitations and the fear of the public to be in public, large corporations made more money than they could have ever imagined. According to Amazon’s own financial data, the company’s net income increased to $21.3 billion in 2020, compared with net income of $11.6 billion in 2019, a 183.6% increase. Walmart, a store that was provided the luxury to stay open when small businesses providing the same exact products were forced to close their doors, increased their annual net income for 2020 to $14.881B, 123.1% increase from 2019.
According to the U.S. Small Business Association, private-sector employment in Delaware decreased 18.6% during the 12-month period ending in April 2020. This was below the increase of 1.3% during the prior 12-month period. This points to the fact that the First State has not considered small businesses to be a priority, even though small businesses created 4,776 net jobs in 2019. Firms employing fewer than 20 employees experienced the largest gains, adding 2,909 net jobs. The smallest gains were in firms employing 100 to 499 employees, which added 871 net jobs. These stats speak to the fact that as a whole, small businesses in Delaware are pulling more than their weight, employing our locals more often than out of state corporations. Yet when it came to giving them the opportunities to bring our local economy back through opening their doors and employing locals, big corporations were given the upper hand.
I have been encouraged by moves by lawmakers that have called for a safeguard on small businesses from unemployment claim insurance costs for employees during the pandemic that had to be let go due to the COVID-19 closures and restrictions. This is a starting point of what should be a much more robust hand up to the business leaders in our communities that we entrust to employ our neighbors, friends and families as well as provide our communities with goods and services. There are so many antiquated, restrictive business laws already on the books that need to be removed such as the limitations on how many brewpubs a local restaurant company can open in the state of Delaware. As so many Delaware businesses are still living on federal and state subsidies to survive, we must give them an opportunity to get back on their feet before directing by law that their highest monthly expense, payroll, must be increased by law before they hire one more employee or pay rent and utilities.
In addition, we must celebrate and continue efforts from our partners like Delaware Tech Community College that work alongside our local businesses to address both sides of the employment equation. The college routinely engages with Delaware businesses and asks what their workforce needs are currently and what they will be in the future. Then, the institution creates curriculum and courses to train Delaware families with certificates and degrees to be able to take those jobs. A great example of this can be found at the Delaware Technical Community College’s Diesel Technology Program. As the auto industry searched to fill the demand from the public for mechanics, the college created a school, which was partly funded by leaders in the auto industry, to train students that will become the future workforce. The new employees not only have a job but a certificate they can take with them, if they decide to work for someone else or start a business.
Meet street-level challenges for families
Our workers and families are struggling for many reasons and at the top of that list is a government that has not been held accountable for the poor services it has provided for generations of Delawareans. Our State government has allowed our water to be polluted on a massive scale, our school systems to fail children in preparing them for their future and a healthcare system that seeks to care for families after they have developed chronic health problems.
All of these challenges have major costs to our families that compound on the individuals that are already on the lower end of the economic scale. How can a family be expected to pay for education opportunities or healthcare when they are spending unnecessary money on the very basic needs of life like water every day to ensure that their children can eat, bath and brush their teeth? In the long-term, measures like HB 200 create a funding for water infrastructure that will help Delaware families connect with larger water systems. This is an important move forward and needs to be celebrated for the massive amount of time and effort it took to accomplish. But we need to address situations on the street-level where our families are still drinking unsafe water. As it will take years to get infrastructure in the ground and to homes, the Clean Water Filtration Bill HB 69, which was voting out of committee but has yet to see the House floor, addresses this issue and allows families that meet income levels and have contaminated water to immediately receive grants for a water filtration system on their home. This bill accomplishes this with a current funding source from the Department of Health without raising taxes.
Our education system is still designed for the working environment of the industrial revolution and is not preparing large portions of our student population for success after public school. A focus on annual state tests have taken up valuable time from teachers to learn the needs of each child and work alongside them to address their individual needs. At the State level, graduation rates increasing by one or two percentage points are celebrated, yet according to Delaware Tech Community College, over 60% of our Delaware students have to take remedial classes before starting college courses. The countless teachers I have talked with state that we need to focus on the street-level challenges and help children sharpen their ability to learn on their own. Instead of teaching them facts to memorize, they need the skills of how to acquire, examine and articulate those facts to better understand the world around them. That will give them life-long skills that will serve a higher purpose in all aspects of their lives. The great thing about this is teachers already know how to do this, and they do not need help from the government to tell them how.
Where local government can help is funding more opportunities for early education, high-need areas and scholarship opportunities for continued education. I am proud to be a sponsor of SEED+, a bill that expands scholarship opportunities for adults seeking new skills for new careers in some of the highest-demand fields in our state. SEED+ will give individuals in our state the ability to create an educational foundation so that they can make independent decisions in their lives that best fit the needs of their families.
One of the largest expenses to each family in Delaware and across the nation is the cost of healthcare. The compounding effect of being on the lower end of the income scale and having poor health makes life more difficult in almost every way. The focus of our current healthcare system is reactionary care instead of proactively promoting healthy lifestyles. Engaging families early and often leads to less challenges and stress not only on the individual but our system as a whole. As a first step, I was fortunate to be part of the partnership that created the Primary Care Loan Repayment Bill that incentivizes doctors to start family practices in the First State. We are in a crisis mode currently as our first defense in health care, our primary care doctors and their support team, are leaving the state at a faster rate than they are moving in.
The lack of affordability of healthcare is inexcusable in Delaware and the same old solutions have been rattling around for years. It is time we look outside of the United States and work together across the political aisle to find a sustainable future for innovative healthcare. Long-term solutions in this area will put the largest amount of money back into the pockets of working families. It is not simple by any stretch of the imagination but the rewards for our society are even greater.
Remember who we serve
On the surface, raising the minimum wage to $15 per hour seems like it will address economic challenges for some workers but there are so many unanswered questions that need to be addressed before jumping into such a large, comprehensive decision that directs our public and private economies through government policy.
Our recovery from the pandemic is not going to come from national agendas or large corporations. We must realign our focus on our families in Delaware. Through studying our local economy and creating street-level plans to address our environment, education and healthcare challenges, we can be true leaders. Politicians may direct people to do as they say, but public servants work alongside our neighbors to find community-driven solutions for long-term sustainability.
Bryan Shupe is a small business owner and the Republican state representative for District 36.