Read and write half page summary How Business Owners Can Survive -- And Profit F

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Read and write half page summary

How Business Owners Can Survive -- And Profit From -- The New Higher-Wage Environment

By Bryan Borzykowski

Earlier this year, 18 states and 20 cities saw their minimum wages rise. Maine experienced the biggest jump, a $1 increase to $10 an hour, while seven states, including New York, had hourly rates climb by 50 cents. The changes took effect in January, but many businesses are still figuring out how to survive — and even thrive — in the wake of these hikes.

According to Chris Ryan, ADP’s vice president of strategic advisory services, rapid job growth in high-cost urban corridors, an aging service workforce and a new focus on community economic development have been key factors generating the political pressure to raise the minimum wage. But, he says, wages would be rising in this tight labor market even if politicians had done nothing.

“Business owners should expect substantial pressure on wages with or without regulations,” he said.

Business who resist these changes, or wait for lawmakers to force them to adapt, could have difficulty attracting talent or even staying in business. Labor-intensive, low-margin business operations, in particular, may no longer be sustainable in areas with shrinking labor pools. Even those in environments with strong labor forces could face problems if their staffers leave for companies that offer higher pay.

Better Economic Benefits

In the bigger picture, minimum wage increases can create opportunities for some companies to make more money, says Ryan. While there are competing arguments about the extent to which wage jumps boost business and the economy, many economists believe that a rise in pay is good for both workers and companies.

Higher minimum wages boost consumer spending in the local economy, with direct benefits to the local business community, said Ryan. “This was the justification that Henry Ford provided in the early part of the 20th century when he doubled the wages of autoworkers, noting that these workers would now be able to purchase the automobiles that they were manufacturing,” he said.

Higher wages also encourage people to re-enter the workforce, which then helps expand and improve the supply of labor, adds Scott Steinberg, a trends expert and author of “Millennial Marketing.”

“When wages go up, you do find a lot more candidates applying, because you’re drawing from a wider pool [of people] who may not have seen the position as desirable in the past,” he said. “People tend to switch roles based on what’s available to them.”

Bottom line: A higher-wage environment can improve revenues and labor conditions for all businesses, even those that don’t do much to take advantage of it. But there are also proactive measures that companies can take to move forward even as the tide rises.

Instead Of Just Slashing, Think

For one thing, companies might rethink their business models.

“The knee-jerk reaction would be to raise prices or [reduce staff], but the better response is to look at opportunities and be inspired to find ways to streamline and optimize,” Steinberg said. “Find ways to not pass on any additional expenses to the customer.”

Ryan notes that a tight labor market is especially punishing to marginal businesses and non-core business operations. In this type of environment, it’s critical to stay focused on maximizing customer value. Rethinking product mix and improving productivity and scale should be the first priorities, while price increases and relocation should be viewed as last resorts.

Take Steps To Boost Your Company’s Value

Ryan stresses that successful companies, which he defines as the category leaders that are first in market share, quality, service and reputation, tend to be disproportionately better off than their peers when labor costs are rising, for two reasons. First, they’re able to command more from their customers. Second, they can attract better workers. Both of those things boost a company’s value in general. A company that can command more can test out new products or services, potentially at higher price points. And having better workers means having better customer service, which also redounds to a company’s benefit.

“Customers will always pay a premium for a product or service they feel is of higher quality or offers greater value or performance,” said Steinberg. “It’s in the company’s best interest to find ways to offer as much value as possible.”

“An employer’s brand — both in the way it serves customers and as a great place to work — becomes a major competitive advantage,” Ryan said, adding that selling at the lowest price without adding any value will make less sense in a higher-wage environment. Consumers can simply afford to pay more for better things. “The higher wage may weaken competitors whose primary business advantage was lower pricing.”

Expect More From Your Staff

Whether the government mandates a raise or not, if you’re paying employees more, you have a right to expect more from them, says Ryan. That doesn’t mean you should overwork your people, but you have the right to make sure they’re providing services that can add value to your business.

Consider a wage hike an opportunity to improve your workforce, Ryan says. Typically, lower-paid staffs have high turnover rates, and that can lead to additional costs like more training, declining service levels and more product defects. A better-paid workforce can mitigate these issues.

“The business that simply raises wages in reaction to regulatory requirements, without seeking a return on its investment, is setting itself up for failure,” said Ryan. “Give more, but expect more in return.”

When it comes down to it, the businesses that thrive are the ones that create high-performing teams that can deliver value and service to their customers. That’s important no matter the pay, and no matter the sector you’re in.

“Higher minimum wages,” said Ryan, “simply magnify the need for strong business leadership and sound operating practices.”

Explanation / Answer

As per Chris Ryan, ADP's VP of vital warning administrations, quick employment development in staggering expense urban halls, a maturing administration workforce and another attention on network financial improvement have been key elements producing the political strain to raise the lowest pay permitted by law. Be that as it may, he says, wages would ascend in this tight work advertise regardless of whether lawmakers had done nothing.

"Entrepreneurs ought to expect considerable weight on compensation with or without directions," he said.

Business who oppose these progressions, or sit tight for administrators to drive them to adjust, could experience issues pulling in ability or notwithstanding remaining in business. Work serious, low-edge business tasks, specifically, may never again be practical in zones with contracting work pools. Indeed, even those in conditions with solid work powers could confront issues if their staff members leave for organizations that offer higher pay.

In the master plan, the lowest pay permitted by law increments can make open doors for a few organizations to profit, says Ryan. While there are contending contentions about the degree to which wage bounces help business and the economy, numerous financial specialists trust that an ascent in pay is useful for the two laborers and organizations.

Higher least wages support buyer spending in the neighborhood economy, with guide advantages to the nearby business network, said Ryan. "This was the support that Henry Ford gave in the early piece of the twentieth century when he multiplied the wages of autoworkers, taking note of that these specialists would now have the capacity to buy the cars that they were producing," he said.

Higher wages likewise urge individuals to return the workforce, which at that point extends and enhance the supply of work, includes Scott Steinberg, a patterns master and creator of "Millennial Marketing."

"At the point when compensation go up, you do discover significantly more competitors applying, in light of the fact that you're drawing from a more extensive pool [of people] who might not have seen the situation as alluring previously," he said. "Individuals tend to switch parts in light of what's accessible to them."

Primary concern: A higher-wage condition can enhance incomes and work conditions for all organizations, even those that don't do much to exploit it. Be that as it may, there are likewise proactive measures that organizations can take to advance even as the tide rises.

For a certain something, organizations may reevaluate their plans of action.

"The automatic response is raise costs or [reduce staff], yet the better reaction is to take a gander at circumstances and be roused to discover approaches to streamline and upgrade," Steinberg said. "Discover approaches to not pass on any extra costs to the client."

Ryan takes note of that a tight work advertise is particularly rebuffing to negligible organizations and non-center business tasks. In this sort of condition, it's basic to remain concentrated on amplifying client esteem. Reexamining item blend and enhancing profitability and scale ought to be the principal needs, while cost increments and movement ought to be seen as last resorts.

Ryan stresses that effective organizations, which he characterizes as the classification pioneers that are first in piece of the pie, quality, administration and notoriety, have a tendency to be lopsidedly preferred off over their companions when work costs are ascending, for two reasons. In the first place, they're ready to charge more from their clients. Second, they can draw in better specialists. Both of those things help an organization's an incentive all in all. An organization that can charge more can try out new items or administrations, conceivably at higher value focuses. What's more, having better specialists implies having better client benefit, which additionally redounds to an organization's advantage.

"Clients will dependably pay a premium for an item or administration they feel is of higher quality or offers more prominent esteem or execution," said Steinberg. "It's in the organization's best enthusiasm to discover approaches to offer however much incentive as could be expected."

Ryan stated, including that offering at the most minimal cost without including any esteem will have less rhyme or reason in a higher-wage condition. Purchasers can just stand to pay more for better things.

Regardless of whether the administration orders a raise or not, in case you're paying workers more, you have a privilege to expect more from them, says Ryan. That doesn't mean you should exhaust your kin, yet you have the privilege to ensure they're giving administrations that can enhance your business.

Consider a wage climb a chance to enhance your workforce, Ryan says. Commonly, bring down paid staffs have high turnover rates, and that can prompt extra costs like all the more preparing, declining administration levels and more item surrenders. A superior paid workforce can moderate these issues.

All things considered, the organizations that flourish are the ones that make high-performing groups that can convey esteem and administration to their clients. That is essential regardless of the compensation, and regardless of the part you're in the workforce.

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