MINIMUM WAGE HIKE
How Will it Impact Business?
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n July, 14 U.S. cities, states and counties, plus the District of Columbia, raised their minimum wage mirroring the legislative initiative to increase the minimum wage across the country. Te minimum wage was increased in 15 places: two states — Maryland
and Oregon, plus Washington, D.C., Los Angeles County, Calif., and 11 cities (including Chicago, eight cities in California and two in Kentucky), according to the Te Wall Street Journal. At the federal level, the Obama Administration has expressed support for
raising the minimum wage from $7.25 to $12 per hour by 2020. We polled arenas across the country, asking: “How will an increase in minimum wage affect your business?” Teir responses are as follows:
“We’re at $9.75 per hour right now and headed to $11.25 per hour next July. We’ll raise prices to cover the additional cost. This won’t matter much in the long run. Portland is in a long period of growth due to increasing population, and the influx of Californians.”
Don Baldwin
Regional and General Manager Lloyd Center Ice Rink, Portland, Ore.
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“Raising the minimum wage to $12 to $15 an hour will have the greatest impact on our business. This alone will increase our payroll cost by 20 to 30 percent. In a business that is very labor intensive, this will hurt us drastically. The bigger impact will be in other employee pay classes. Skating coaches, hockey coaches and ice resurfacer drivers will now all look to be paid more.
“We can easily see a $15 minimum wage increase in our total payroll by hundreds of thousands of dollars per year. We cannot raise prices enough to keep pace with that. I would have to imagine that this increase would impact our bottom line directly for the foreseeable future. It will also hurt the workforce of the future, because we will not be able to afford to hire high school and college students with little or no work experience at $15 per hour.
“We anticipate the wages in our area to go to $15 per hour due to the cost of living and the fact that New York State has already passed this law. This will hurt our business. We would have liked
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to see a three-tier minimum wage that perhaps sets the wage lower for a 16 to 20 year old, with little to no experience, who is working a part-time job.
“Over time we will have to adjust. Between the minimum wage and the new salary level for exempt employees, we will have to consider different ways to run our business, price increases and possibly trying to do more with less staff. Time will tell.”
Kevin McCormack Arena Operations Vice President Floyd Hall Arena, Little Falls, N.J.
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“Due to the way SDIA runs its programs, similar to Skate Town, we staff a large amount of base-pay employees (kids between 14 to 20 years old). In San Diego, we now have to pay $10.50 per hour and it’s going up to $11.50 in January. Our nearest competitor is Poway Ice, four miles from us, but in another city, thus their base wage will stay at federal levels, $10 per hour — a large differential in labor costs.
“Also, I believe it’s unfair to pay this high wage to kids who we have to invest a large amount of time to manage. We expect the labor costs of the rink to increase by at least $1 million this next year, an enormous amount to recover in my market where we are overbuilt. We will start by redesigning our labor business model and deduce labor, thus service to the customers will be reduced, causing customer dissatisfaction and
lost revenue that we would have been spending on infrastructure. We expect locations to start suffering.
“We would love to hear how the industry is going to turn this negative attitude around and help us see a positive business model ahead.”
Philip Linssen Chief Executive Officer
San Diego Ice Arena, San Diego, Calif. ___________________________________________
“We project that our labor costs will increase by approximately $750,000 annually by 2022 when minimum wage reaches $15 per hour. We need to increase wages across the board, not just for those that make minimum wage as it’s not fair to pay someone who has been here for a while the same wage as a new employee. We have started increasing prices already to attempt to compensate for this increase in labor costs and we’re already feeling the impact.
“When the minimum wage was increased, we were told that we would have to increase prices and/or change our business model. We plan to do both. We are investigating using touch screen kiosks to sell admission stickers rather than have a cashier on duty. We may eliminate our café and use vending machines instead. Functions with marginal income contribution will need to be eliminated.
Our business model has much higher labor costs than most ice arenas as we
ISI EDGE WINTER 2016
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