The government wins, and I’ll tell you why.

By Bill Scott, founder of StoreReport LLC & Scott Systems Inc.

I’m sure I may be setting myself up for a lot of grief, but I’ve been studying the convenience store industry for over three decades, and I am certain that most convenience stores will not be able to sustain a $15 per hour minimum wage for an extended period of time.

This is not a political issue, it is an economic issue. We only need to look into the recent P&L’s of these businesses to come to the inevitable conclusion.

The average profit of a convenience store has stood at around 2.1% of sales for an extended period of time, with over 50% of the cost coming from employee salaries. Nevertheless, I think this minimum wage issue is on our president’s bucket list, and an executive order is surely in the making.

Bring it up at NACS
As you head off for the NACS convention next month, I hope there will be some discussion on this issue, because without having time to work out a solution, your only action may be to scale down inventory, cut store hours and lay off employees. In a few words, it looks to me like the convenience store industry is about to be severely crippled once again.

It should be of no surprise, because it won’t be the first American industry to be affected. The steel industry, the automobile industry and the petroleum industry are merely three of the major industries that come to mind. The coal industry is now under serious attack, and although I claim to be no expert in the general retail industry, all signs point to the brick-and-mortar retail industry to be the next in line.

Nobody wants to talk about it
Recently, I posted the question on Quora.com, and almost instantly I received a message from Quora that my question had been isolated due to violating their rules for posting, but the subject did gain some popularity before it was hidden from the public. I guess there are some topics that should not be discussed, as they often result in political arguments, and who wants that? But someone has to be willing to take the heat in order to put the question up to serious debate.

In the story I posted, I talked about how my minimum wage job as a teenager prepared me for the real world, and what a difference it made in my life. I also cited a recent survey that claimed that in 35 states, welfare paid more than the current minimum wage of $7.25 per hour, and I wondered why anyone would want to work at all. I think this is the main thing that caused my post to be removed and earned me a scolding from the “Quora Team.”

But, if we do not discuss these issues in a meaningful and constructive way, how will we ever be able to solve these problems? It’s as if the issue has already been decided (by someone or some group), so opponents need to ‘shut up’ and mind their own business.

My knowledge and experience leads me to believe that an increase in minimum wage in the convenience store industry, and possibly in the retail industry in general, will eliminate jobs, cause businesses to close or at a minimum lead to more automation. It is more than just an opinion as we have already seen the results of higher wages putting millions of Americans out of work, and entire industries being automated and moved off shore. So it is not just an opinion, it is based on facts with a plethora of historical data to back it up.

So who is the winner in a minimum wage increase anyway?
It’s not the employees, because a short term increase in salaries is bound to be followed by an increase in unemployment. In addition, minimum wage increases are bound to raise the prices of everything, so the increase in income will no doubt be eaten up by the increased prices they will have to pay for goods a services.

It’s not the consumer, because it is doubtful that the increase in income will increase their buying power in the stores.

It’s not the retailer, because retailers are already paying more than 50% of their gross income to employee salaries, matching FICA and Medicare.

It’s beginning to look like the Federal government will be the only beneficiary, because of the increases in taxes collected and remitted; and the consumers, employers and their employees will have to foot the bill.

In all of my years of working with convenience store operators, I have yet to hear even one complaining they weren’t being paid enough. So what say you? What is behind this movement to increase the minimum wage and why?