Raising Minimum Wage

Executive Summary
Purpose and method of this report
The base salary at Regal Potomac Yard 16 is one of the lowest in the surrounding area. Although minimum wage differs from business to business, the $8.00/hour should be raised to $10.00/hour. Often businesses are afraid to increase minimum wages. They believe it could have a negative impact on the local economy and could result in lower profits. However, research demonstrates raising the minimum wage may have little to no impact both short-term and long-term in developed countries like the United States with regards to the economy. Furthermore, some research suggests such a change may improve profits for businesses due to higher productivity levels in employees. The purpose of this report is to:
· Understand why increasing the minimum wage at Regal will improve worker productivity.
· Recommend reasons why the minimum wage increase will at worst, promote no significant change to profitability for Regal, at best, promote higher employee retention.
By conducting a brief literature review, we learned of the limited effects raising the minimum wage has on businesses. Negative or positive, studies demonstrated no statistical significance in the local economy or the profitability of businesses when minimum wages are raised. Comparing the minimum wage of in Regal Potomac Yard 16 to other businesses in the area, Regal had the lowest. The same can be said of other theatres nearby that had at least 25 cents higher minimum wage than Regal Potomac Yard 16.
Conclusions
Most of the literature review illustrated raising the minimum wage does not have a negative impact on a company’s profits and the local economy. However, the evidence rings true for those in developed countries. Businesses that raise minimum wage in underdeveloped nations may result in negative outcomes like job dismissal, increased stress due to job loss, and lower profits from a smaller workforce.
Table of Contents
Contents
Executive Summary 1
Table of Contents 2
Introduction 3
Body 3
Effects of minimum wage increase on productivity 3
Effects of minimum wage increase on local economy 4
Define minimum wage gaps within local area 4
Conclusions and Recommendations 4
References 5
Introduction
Beneficial effects come from minimum wage increases. The base salary at Regal Potomac Yard 16 should be raised from $8.00/hour to $10.00/hour because it will raise worker morale, productivity and such an action will have a minimal effect on profitability and the local economy (Allegretto & Reich, 2017). Higher productivity and increased morale are already seen in the United States in the service industry, particularly restaurants (Lynn & Boone, 2015). The service industry makes up a large sector of employment, including employees working in theatres and cinemas.
Although the fear is understandable regarding profit loss as seen in other countries like South Africa where businesses began to layoff employees due to minimum wage changes (Bhorat, Kanbur, & Stanwix, 2014), other countries demonstrate negligible effects. Vietnam for example, showed no statistically significant change after implementation (Cuong, 2013). Overall, the potential negative consequences are not seen when regarding larger sample sizes and both long-term and short-term effects (Cuong, 2013). Additionally, positive effects like employee morale and employee retention should be regarded when considering minimum wage increases.
Because the differences may be negligible regarding profitability and local economy but can lead to improved morale and employee retention amongst employees (Jardim et al., 2017), why can it not be a technique utilized by Regal Potomac to improve overall employee quality within the company? Such a concept has shown marked success for businesses within the serving industry. It may lead to improvements that may in turn increase the company’s competitive advantage against its local competition. When compared with their competitors, Regal Potomac has the lowest minimum wage and should increase based on potential positive effects. As a result of this report, my reader/s will know:
-How increasing minimum wages affects productivity.
-How increasing minimum wages affects the local economy and promotes competitive advantage.
Body
Effects of minimum wage increase on employee retention and productivity
Because Royal Potomac Yard has the lowest minimum wage and so many competing theatres nearby have increased their minimum wages, they are facing stiff competition not just regarding customers but recruiting employees. The effect of minimum wage increases in the surrounding area have resulted in improved competitive advantages for every theatre except Regal Potomac Yard. The service industry in the United States has seen an improvement among employee productivity and morale (Lynn & Boone, 2015). The theatres competing with Regal Potomac are a great example of this. Because new employees recognize they will receive more money in Regal Potomac Yard’s competitors, they do not even consider working for that location. Furthermore, productivity can yield greater profits for companies (Lynn & Boone, 2015), leading to the conclusion that the raise of the minimum wage in the location from $8.00/hour to $10.00/hour makes the most sense.
Effects of minimum wage increase on local economy
The local economy appears to be fairing well considering Virginia’s state minimum wage is $7.25/hour. Looking at the minimum wages of Potomac Mall and the Regal Potomac Yard’s movie theatre competitors, all have increased their minimum wages to at least $8.00/hour with most at $9.00/hour or more. Such growth in minimum wage provides indication that raising beginning wages may fair well for the company, especially when regarding the companies near it. The local economy within the location of Regal Potomac Yard consists of businesses increasing their minimum wages well above the state minimum. Should Regal Potomac Yard join in and raise their minimum wage from $8.00/hour to $10.00/hour, they may see improvements not just in profits, but also in employee retention. Because they operate with the lowest minimum wage in the area, employees are not as willing to work for them compared to other businesses. That can seriously bring down the competitive location of the movie theatre.
Define minimum wage gaps within local area
The minimum wage gaps within the area are markedly significant. For instance, in the Potomac Yard Mall, the beginning wages or minimum wages of companies are as follows: Barnes and Nobles is $9.00/hour, Best Buy is $11.00/hour, Old Navy is $8.70/hour, Dunkin Donuts is $9.00/hour, Target is $9.00/hour, Cava Coffee is $13.00/hour and AT&T is $15.00/hour. AT&T has the highest minimum wage for employees, yet still maintains it store within the mall. How is it that AT&T has close to twice the minimum wage rate as Regal Potomac, and still manages to operate in the mall? Perhaps it is because the profitability of the store is not determined by the minimum wage (Jardim et al., 2017). Additionally, employees may work harder and feel better due to increased pay, leading to higher productivity.
When examining the movie theatre beginning wages, again, Regal Potomac Yard is the lowest. Within 12-mile radius, 6 movie theatres offer customers a movie watching experience. The movie theatre offering the highest minimum wage at $11.00/hour is AMC Rivertowne, which is 9 miles away from Regal Potomac Yard. The theatre closest to Regal Potomac, operating just 3 miles away, offers a minimum wage of $10.00/hour is AMC Shirlington. The second lowest of the six, Regal Kingstowne offers a minimum wage of $8.25/hour. If Regal Potomac wishes to compete with AMC Shirlington, the company should raise the minimum wage for the Potomac Yard location to $10.00/hour. The increase could lead to more productive workers leading to a greater competitive advantage against AMC Shirlington.
Conclusions and Recommendations
Based on the findings from the literature review and the information collected from the surrounding businesses near Regal Potomac, the following conclusions are drawn.
1. Regal Potomac is the theatre with the lowest minimum wage in the area. Additionally, Regal Potomac is one of the businesses with the lowest minimum wage in the area.
2. Because other businesses nearby have raised the minimum wages and have not seen problems regarding profitability or shown an overall downturn in the local economy, the potential increase in minimum wage for Regal Potomac from $8.00/hour to $10.00/hour seems feasible.
3. Most of the literature review showed a negligible difference in the local economy and profitability regarding raising minimum wages.
4. Raising the minimum wage for Regal Potomac could grant them a greater competitive advantage due to potential increased morale and employee retention.
After considering the findings and conclusions of this study, the following recommendations are offered in an effort to improve Regal Potomac Yard 16’s performance and increase their competitive advantage.
1. Increase the minimum wage of employees in Regal Potomac Yard 16 from $8.00/hour to $10.00/hour.
2. Assess employee morale and productivity after implementation of change in minimum wage.
3. Assess quarter profits for theatre after implementation of change in minimum wage.
4. Decide whether the changes observed support or refute the decision to raise the minimum wage.
5. Use data as a gauge for what to do in the future when the potential likelihood of wage increases will surface again. This will be especially important if the changes made to the minimum wage are positive.
References
Allegretto, S., & Reich, M. (2017). Are Local Minimum Wages Absorbed by Price Increases? Estimates from Internet-Based Restaurant Menus. ILR Review, 71(1), 35-63. doi:10.1177/0019793917713735
Bhorat, H., Kanbur, R., & Stanwix, B. (2014). Estimating the Impact of Minimum Wages on Employment, Wages, and Non-Wage Benefits: The Case of Agriculture in South Africa. SSRN Electronic Journal, 96(5), 1402–1419. doi:10.2139/ssrn.2184248
Cuong, N. V. (2013). Do Minimum Wage Increases Matter to Firm Profitability? The Case of Vietnam. Journal of International Development, 29(6), 790-804. doi:10.1002/jid.2920
Hoffman, S. D. (2015). Are the Effects of Minimum Wage Increases Always Small? A Reanalysis of Sabia, Burkhauser, and Hansen. ILR Review, 69(2), 295-311. doi:10.1177/0019793915610558
Horn, B., Maclean, J., & Strain, M. (2017). DO MINIMUM WAGE INCREASES INFLUENCE WORKER HEALTH? Economic Inquiry, 1. Retrieved from ftp://repec.iza.org
Jardim, E., Long, M., Plotnick, R., Van Inwegen, E., Vigdor, J., & Wething, H. (2017). Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle. doi:10.3386/w23532
Lynn, M., & Boone, C. (2015). Have Minimum Wage Increases Hurt the Restaurant Industry? The Evidence Says No! CENTER FOR HOSPITALITY RESEARCH REPORTS.
Meer, J., & West, J. (2016). Effects of the Minimum Wage on Employment Dynamics. doi:10.3386/w19262