How Will the Increase in Minimum Wage Affect a Retailer’s Bottom Line?

    Dec 06 2017

    Topics: cash management

    The Ontario government has voted to raise the minimum wage to $15.00 an hour to provide people working in retail and other industries with salaries that can raise them above the poverty line. This is great for employees who have long struggled to make ends meet. 

    Download our free guide for CFOs to find out how cash handling is affecting  your bottom line.

    Some, though—like the Ontario Chamber of Commerce—are claiming such an increase will “ruin” businesses. Though unlikely, the question does remain: What effect will a minimum wage increase have on retailers and their bottom lines? 

    While you prepare your business by finding automation solutions to decrease overhead costs, here are some likely possibilities for how the wage increase will affect retailers.

    The Cost of Living

    Some debate rages on whether retailers will have to downsize staff or raise prices in order to manage the increase in staff wages. Some believe that a minimum wage increase will force up the cost of products across the board, affecting retail businesses on a razor’s edge, thus raising the cost of living and negating the wage increase in the first place. 

    The truth remains that if people cannot afford the cost of living, then they certainly will not be able to afford new products. Though the immediate cost is bound to be jarring, retailers will likely be able to find a balance that will, in the long run, be beneficial to their employees and show goodwill that will positively impact the economy.

    Make More; Spend More

    When employees and entire families are able to make more, the likelihood of them spending more rises as well. This is a positive effect on retailers and one they should encourage by embracing the wage increase. By paying employees not only a living wage, but one able to bear the burden of food, new clothes, and rent, and enabling citizens to still have enough left over to buy new products on their wish lists, retailers are likely to see an increase in sales. Whether it will be enough to compensate for the increased wages, only time will tell. However, the longer people feel secure in their incomes, the more they will spend on living.

    Less Employee Turnover

    If employees have financial security with the wages earned at their jobs, they’ll feel comfortable sticking around. This means less turnover in retail positions, which means fewer wasted dollars on finding and training new hires. 

    In the long turn, those amounts will add up and balance the increased wages.

    Subtle Tactics: Better Customer Service

    Retailers, ever dependent upon the quality of their services along with their products, may realize the minimum wage increase actually improves their sales. How? Employees who feel financially secure will be happier. Happier employees are better at customer service. As your customer service improves, customers will return again and again to support a company that supports its people. 

    Will an increase in minimum wage force companies to increase product costs, thus raising the cost of living and negating the minimum wage increase? Will more secure employees feel comfortable spending more and putting that money back into the economy? Ultimately, there’s no way to truly predict what will happen. 

    In order to feel more financially secure, consider automating your current cash management processes to reduce overhead costs.

    A CFO's Guide: How Cash Handling Is Affecting Your Bottom Line

    Andrea Lombardi

    Andrea Lombardi

    Andrea joined the CashTech team upon its inception in 2003. Learning the business from the ground up, she now utilizes her expertise in account management, planning, and negotiation while managing the daily operations of CashTech’s sales, marketing, and logistics departments. Andrea holds a bachelor’s degree from the University of Western Ontario. She enjoys travelling and has a passion for personal fitness, including obtaining her kettlebell certification. Andrea lives in Toronto with her husband and two young sons.

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