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Musings: On Welfare and Ignorance About Small Business

TheNorthlandNews.com publishes press releases and newsletters from our local elected officials on a regular basis inside of the opinion section of the site. It’s my belief that we should be engaged and involved with our local elected representatives. The discussions that occur at this level are important to our communities and to our lives.

The other day TheNorthlandNews.com published an opinion piece from Missouri State Representative Ken Wilson who represents portions of Kearney and Smithville. In it, he used Smithville small business owner Cami Wagers to demonstrate a problem with our current welfare system.

Wagers owns and operates Cook’s Corner Cafe. It’s located right on 169 Highway a little south of the intersection of 169 and Main St. I’ve eaten there a couple times myself. It’s a great little place to pick up some homestyle cooking.

If you haven’t read the original piece, I’d encourage you to check it out by clicking HERE.

I applaud Ms. Wagers for having the willingness to use her business to bring up an uncomfortable but important topic. That’s courage, and it’s my personal belief we need more of this in the business community.

I think it cut to the heart of an issue that I believe that many small business owners face in our local community and communities across the country.

The most expensive cost that any entrepreneur faces is labor. For a small business, one who starts from the ground up, there’s often not a lot of capital to pay large wages. So, in many cases, that leaves a small business owner to hire at a lower wage.

Low wage workers sometimes are on government benefits. Some of those workers, those that want to transition to higher pay work, struggle making the transition across what I sometimes describe as “the welfare wall”. Give an employee an increase over that wall, and suddenly all the benefits they receive from the state are reduced and a new reality begins that they may not be able to afford. The employee is then left with a choice, it’s either make a small amount more and a lot less in benefits, or back away from the wall and avoid trying to cross it because your level of benefits actually gives you more than that small increase.

It’s been my experience in life that a significant portion of Americans suffer from incredible delusions and misunderstandings about business. I’m not sure the percentages, but my general sense is it’s an amount that matters.

Once the story was shared to our Facebook audience a comment was made that demonstrated that problem. (I have blurred out the profile picture and name of the commenter out of respect. It’s not my intent to personally attack someone although she did choose to do so herself.) You’ll also notice that Ms. Wagers took the time to clarify. Pardon the language, but I can’t say I blame her. I’d have been pretty upset myself.

 

Most Americans believe in some form of a social safety net as the small business owner in question points out above. Personally, I don’t because I think the evidence is overwhelming that it does more harm than good and creates perverse incentives like those in question. That’s not the point of this Musing.

Welfare is a challenging topic. It’s difficult because it’s not black and white. There are numerous reasons why a person may be poor and receive help from the government. It might be their skillset, their education level, their work ethic, their level of integrity, their ability to manage money, they may have hit a bad patch in life, or in some cases how entitled they are. Every person is different and has a different story that led them to where they are.

Wagers states in her comments above that she had an employee who she was going to pay about $2,000 a month. Admittedly, that’s not going to be enough to make ends meet by itself.

I realize there’s a more complex discussion that could be had about this individual in question. There’s a legitimate moral discussion to be had about how much should we help a family that has two income earners. As I said above, some are poor for various reasons. While there is an official poverty line, many define poor at different levels of expectation in our society.

I’m not going there in this discussion because I really don’t know their pesonal situation. I’m just going to assume that the individual in question and their family is doing everything they can to get off the system. I’ve heard similar stories to this one from others.

According to Wagers, the employee in question turned down the job because the existing social safety net punished him from taking the next step to better himself. That’s a problem that requires reform.

There’s another problem I thought this comment demonstrated. It’s way too easy to call a person a “horrible person”. It’s way too easy to think you understand what it means to run a business. And it’s way too easy to type a comment on a social media platform instead of learning more about the complexities of the issue at hand.

Let me be abundantly clear about something. There would be no jobs, no roads, no public schools, no police, no fire department if it wasn’t for the fact that some entrepreneur was willing to act on an idea and start a business. Business owners pay taxes and employees who are paid by the business owners pay taxes. Money doesn’t get carved from some magical fixed pie, it’s created inside the economy by businesses. There is no other source.

Are there horrible business owners?

Yup.

Are they the norm?

No way.

Don’t get me wrong. I’m not saying that some businesses shouldn’t pay more. I’m sure there are some. Personally, I think it should be a goal for a business to pay people as much money as possible. After all, it brings in quality employees that will continue to grow a business. I just find it exceptionally unfair for other people to dictate wage expectations to an entrepreneur who founded and created a business. If you want to go pay a high wage, then hop in the arena of business yourself and show us how it’s done.

I’ve seen this concept of a “livable wage” become more mainstream in recent years. I find it concerning.

I think it’s driven in part by an education system that is filled with people who know little to nothing about what it takes to run a business. They’ve never had to meet a payroll, they’ve never had to spend an entire weekend working in their business because a crisis occurred, they’ve never had to worry about paying an employee or paying themselves, they’ve never wondered if one wrong accounting mistake will trigger an audit, or they’ve never stayed up late at night worried if the next downturn in the economy was going to be the end of them and all their employees.

It’s reinforced by a media infrastructure that’s filled with the same level of ignorance.

That system has created a portion of our society that sees a world where they think they are owed a job, or as this comment pointed out, a “livable wage”. If they’re not given that, it’s because some “horrible business owner” somewhere obviously is out to get the “little guy”.

In some industries like food service, the reality is the market rate for certain positions is on the low end of the pay scale. I’m sorry if you think it is unfair, but it’s just reality. It’s been my experience, and I know several business owners in the Northland, none of them set out to pay low wages. The business realities dictate the wage.

That wage is more than just a salary or hourly pay, too. There’s payroll taxes to pay and liability insurance to pay for.

I’m yet to meet a small business owner that uses $100 bills as Kleenexes and Charmin. I’d argue that most small business owners would love to pay a “livable wage” to as many employees as possible, but it’s not as easy as publishing a comment on a Facebook page. Operating a business is one of the most complex things a person undertakes because it’s a never ending uphill battle. It’s hard work to get a business to that point, and it’s even harder work to make sure you keep that business at a point of success.

Here’s a fact for you: Over 50% of those “horrible business owners” fail within their first 18 months.

If it wasn’t for Wagers, her business, and her family’s willingness to start this restaurant years ago, that job wouldn’t exist at all right now.

The bottom line is this: if we’re going to continue to have a welfare system, it requires reform. We need a system that allows people to transition to successful self-sufficient work. At the same time, we need people in our communities to better understand that it’s not so simple to run a business and create wealth. Entrepreneurs like Wagers shouldn’t be lumped into some stereotypical conception of “horrible business owner”. They should be celebrated, encouraged, and thanked for the ideas that their minds create and the problems they solve.

About Andrew Palmer