Should Business Owners Increase Employee Wages
A Pragmatic Approach
By Fran Halloran
There is a great deal of talk in the media today about wages and that they aren’t rising as fast as our country would like. Despite that the overall economy appears to be moving in a positive direction, some pundits are espousing that employees are not reaping much, if any, benefit from the economy’s gains because employers are not increasing wages at a satisfactory rate. Other pundits are arguing that while the economy is heating up, greedy employers are simply not willing to share profits with employees. Let me suggest that real wage increases are not going to happen anytime soon for one reason and one reason only: fear.
As a small business owner and a radio host, I look for trends, both personally and professionally in my life and the lives of others that might hurt or help me. Those trends that might hurt me, I tend to do my dead-level best to avoid. Those that might benefit me, I try to apply to my life as quickly as possible. One trend I see right now in our community is that many business owners I know are fearful and uncertain of what’s ahead.
The recent economic boom we have seen since November 2016 has certainly been a welcome surprise. Our expectations in previous years were defined by very modest growth in GDP and in the stock market. If my memory serves me (and it does), I distinctly recall the experts in the economic ethos, decrying and lamenting that the election of the current President was going to be the apocalyptic event that ruined our fragile economy. “Watch out for massive market declines,” was the most popular point of view immediately following the election. That clearly has not been the case. Whether you call yourself a friend or an enemy of the current administration, it is hard, almost impossible one might say, to argue against our country’s improving economy and that things are economically better than in years past.
The market has climbed and continues to climb to never before seen levels, and GDP is seemingly growing every quarter. Even so, our fragile economy (you better believe it is still fragile) is one election away from being stopped in its tracks. This “fragility” is the reason employers are fearful about raising wages.
If a business owner increases a person’s wage right now thanks to this economic boom, and then business dries up because a new regime comes to power in the Congress, said business owner is on the hook for the higher wage. Yes, the business owner could go back on his/her word and reduce the wage, but that would destroy employee morale and feel like a betrayal to the employee.
So, business owners are not going to increase wages unless they see a future where continued economic success is a reality they can bet on...and that is not where we are right now. Regardless of which side of the political fence you find yourself, the truth is very simple to see. One side sees government as an obstacle to economic growth; the other sees governmental growth as the vehicle to carry the citizenry into the future. This economic uptick is simply too new and too fragile for employers to be aggressive and raise wages, and our country’s economic future is still uncertain.
The business owners who recognize the need to provide a better wage are getting more and more creative by offering solid wages, as well as offering employee bonuses and enhanced commissions based on performance. This way, if the economy continues to be good, employees and employers both win. If times get tough, then the employer is not on the hook for the additional wage. Some employers are even offering more time off as an incentive for increased production instead of bonuses and commissions as millennials, in particular, appear to be much more interested in time off and quality of life, than more money.
If you are a business owner and you’re struggling with how to properly compensate your people, consider enhanced commissions and bonuses for reaching certain goals and milestones. Talk to your employees honestly about your fears and concerns regarding the newness of this economic boom. Tell them your biggest fear is if you increase wages now, and then things change economically in the future, you will lose their respect and loyalty when you have to decrease wages in an economic downturn. If you are an employee, and you want to make more money, think out of the box and ask your employer to consider commission and bonus opportunities and additional time off if you reach certain goals.
And when you begin to argue for or against a particular political point of view, ask yourself one question: How will this point of view directly affect me from an economic perspective? It’s possible to make smart financial decisions, regardless of the political climate, if you understand the economic forces that impact your situation. Work hard, eliminate debt and save money. Everything else will fall into place.