When Washington mulls economic policies like raising the minimum wage or requiring small businesses to provide employee health insurance, the debate tends to have a theoretical, academic, even surreal feel to it.
For Ed Singleton, it’s about whether he stays in business and his employees keep their jobs.
Singleton runs 11 Subway restaurants, with plans to open two more soon. In 18 years, he has expanded from his home in Ellijay to other towns in North Georgia and North Carolina. Some of his hiring is seasonal, but he has 200 employees on average.
Those 200 people’s livelihoods, he told me this week, are threatened by the agenda of President Barack Obama and the Democrats.
“The things that Obama’s doing are detrimental to small businesses, which are the lifeblood of this country,” Singleton says.
Indeed, the Small Business Administration reports that such firms employ nearly 60 million Americans, or about half of all private-sector workers in the U.S. What’s more, they account for as much as 80 percent of all net new jobs in this country.
Sometimes, however, smaller numbers have more meaning. So consider Ed Singleton’s story.
When the federal minimum wage rose last Friday by 70 cents an hour, to $7.25, Singleton’s payroll shot up by $70,000 a year. An increase of nearly 10 percent, with nothing to show for it.
That includes nothing, or very little, in workers’ paychecks. To make ends meet, Singleton has told managers that their staff must work fewer hours. Customers will notice the difference in the service they get.
So, too, will hard workers who might have gotten merit raises if not for the minimum-wage hike.
“If you have a good employee,” Singleton tells his managers, “it’s going to be tough for me to tell ‘em I’ll give them a raise unless they get into management, because I can’t afford it.”
And the worst, he fears, may be yet to come.
As a candidate, Obama proposed increasing the minimum wage to $9.50 an hour. Such a move would pile $200,000 onto Singleton’s payroll, which now stands just shy of $800,000.
“I can’t stay in business like that,” Singleton says.
The coup de grace, however, would be a federal health insurance mandate. Singleton doesn’t offer his workers health insurance now because doing so would double his labor costs – putting his company in the red and out of business.
Raising prices isn’t a viable option. Singleton says Subway stores have had to cut their prices in recent months to keep customers coming in the door.
If a health mandate comes down from Washington, Singleton already knows what he will have to do. Instead of 200 workers, he could only afford 75.
Perhaps the Democrats would prefer to have 75 people with wages and health benefits, and 125 on the federal dole, than to have 200 jobs. But that’s hard to swallow with unemployment at nearly 10 percent, with a bullet.
And in a city like Jasper (population: 3,000), where Singleton is about to open a second Subway, 30 or so jobs are not a small deal.
But aren’t small businesses spared from coverage mandates under the Dems’ plans? They’ve sure been patting themselves on the back as if that were so.
Yet only the tiniest firms would be exempted from paying a tax if they didn’t provide coverage. Companies with as little as $400,000 annual payroll would be subject to the full penalty of 8 percent of payroll; only those with less than $250,000 annual payroll would go untaxed.
The 8 percent tax for not providing health insurance would cost Singleton’s company – and his employees, in the form of forgone wages – “only” about $60,000 a year.
But that $60,000 would be one more straw, on top of the $70,000 for the last minimum-wage hike and potentially $200,000 for the next one. Eventually, a businessman like Singleton has to think about selling.
“But the problem there,” he notes, “is [Obama] is considering raising the capital gains tax.”
Democrats talk about the jobs their policies have “saved” during the recession. Singleton’s Subway workers hardly seem to qualify.
Note to readers: Kyle Wingfield will begin blogging daily in August. Commenting on this blog will open then.