Timmy!

Before anyone tries to rip me a new one or call me an unfeeling jackwagon, let me say that I understand there are struggles for those trying to get by on minimum wage jobs. It is hard to argue the side of the employer without sounding like an elitist, but I think I may finally have enough facts to show both sides why these forced massive increases are not going to help the workers in the long run.

Tim Hortons (no apostrophe due to some odd Quebec law about people being confused that there may actually be a Tim Horton at this establishment) Canada recently told their workers that due to the new minimum wage increases, the employees would have to start kicking down some scratch to cover part of their benefits. The employees will pay either 50 or 75% depending on length of time employed. The instant responses from a number of people who had done absolutely zero research (proven by the time stamp of the article and the responses) were bashing ownership as greedy, gravy sucking pigs.

Perhaps before this rush to “condemn the rich”, we look at what this hike is going to do to the bottom line at Tim Hortons.

The minimum wage in Canada was 11.25 when these revenue/profit numbers were taken. It jumped to $11.60 in October and as of Jan. 1, is $14.00 per hour. Finding clear data is a little difficult since the merger of Tim Hortons and Burger King into a conglomerate known as RBI. The numbers you are seeing will be best estimates based on all available data. I am also using the lowest numbers I can so as not to over-inflate any of the results.

Tim Hortons has 3892 stores in Canada. Most (all, as far as I can find, but I can only base that on the history of the chain which started as franchise-only and never switched over) of these stores are owned by a franchisee. Based on all available information, a franchisee clears (on average) $265K per year. Let’s do some work to see what this pay hike will do to that owner.

The average number of 4 hour shifts per week for non-management positions is 200 in a non-24 hour store, but this should give us some rough idea of numbers.

There are 800 hours worked per week in any given store meaning that we have 41,600 hours worked per year. At $11.25, this is about $468,000 in minimum wage employee costs. At the new $14/hr, this cost becomes $582,000 per year. That $265K profit to the franchisee becomes $151K. In 2019 and $15/hr, this franchisee will see his profit (salary for an owner) drop to $109K. That is a 60% pay cut…for the person who took the risk and brought jobs to his neighborhood.

Is it really greedy to not want to take a 60% pay cut? The owner put up a half million dollars to start this business. Assuming that they put down 30%, they also have a $350K loan out there somewhere. At averages etc…this is $36K per year, out of the owners pocket, to pay this loan.  This drops the average owner’s actual usable income in 2019 to about the same as his regional manager makes…without the risk of owning the business.

People are often quick to call business owners all sorts of names and make assumptions that they are all riding around on yachts, eating caviar, making it rain, and filming hip-hop videos…but many of them spend 12+ hours a day running their stores.

All of the numbers I used above are averages…think about the stores that are below average. How many of them will have to close or layoff employees?

Retail/Fast Food told us what they would do if they were pushed to a money losing minimum wage. Many of them are rolling out kiosks to replace the front line crew. My local McDonald’s has them already. It won’t be long before self checkout isn’t only for grocery stores.

Instead of 100,000 people having non management jobs at Tim Hortons, there will be 20,000. 80,000 jobs gone. Is this really better for the workers? I have heard the argument many times that it is certainly better for those who keep their jobs. Sure, and what do we do with the laid off employees? What is better about this for them? I see…let’s get them on the dole and then they will need us and vote to keep us in power so we keep giving them things…isn’t that how drug dealers get their clients hooked?

At Canada’s tax rate of 15% for this level wage earner, the current non-management employees of Tim Hortons put approximately $270 million into the government coffers. When 20% of those jobs exist at the higher pay rate, there will be only $68 million in tax dollars. Less to spend and more people needing assistance.

This is only one example. Imagine all of the similar businesses and how they will have to react to these increases.  What about the US, how does this translate?

Over 50.4 % of the minimum wage job holders in the US are 24 and under. Another surprising fact, minimum-wage earners are less likely to be single parents working full-time than is the average American worker. Only 4% of minimum wage earners are single parents. Also keep in mind that minimum wage earners includes those jobs which receive tips. 65% of all minimum wage earners work part time and still have a total family income over 150% of the poverty line.

It was shown that the average price of a cup of coffee in Oakland went up 20% correlating with the exact time as the raise of their minimum wage. How does it help to get a 25% raise when everything around you goes up 20%? It doesn’t.

Based on the tax rate in California, if you received the bump the Hortons’ workers did of 22% from $11.45 to $14, your taxes increase. Your 22% is only an increase of 16% after taxes (not to mention potential loss of benefits should you earn too much). But the prices around you go up 20%…did you actually improve your position, or are you worse off than before?

I am not anti-worker, I am pro capitalism. Pro free market. If Tim Hortons offers $12 per hour and McDonald’s offers $10, then Tim Hortons will have access to more options and most likely a better (and more tenured) work force.

McDonald’s will have to keep pace, or lose employees to the higher paying places. This may not seem like much, but employee turnover is one of the greatest costs to a business. Hiring and training take time and money, it is in a business owner’s best interest to reduce the turnover at all costs.

I get it. The average American hourly rate is $24.57, so bumping everyone to $15 seems easy.  The problem is that we need to start looking at all the data, not just the headlines. It sounds great to offer everyone more money (especially when it isn’t yours), but when you look at the long term side effects and the fact that business isn’t just going to eat the uplift, you see that these forced wage increases actually may hurt those we intended to help.