Higher Wages Put the Squeeze on Museum Stores

August 17, 2015

Nothing strikes fear into the hearts of most small business operators than the talk of increasing the minimum wage. The minimum wage issue continues to be a hot debate between business owners, economists, and politicians. On one side are working folks and their advocates who argue that the current minimum wage is not a living wage. On the other side of the debate are business owners who fear that a quantum leap in the minimum wage will create havoc in their traditional business model.

Like it or not, the minimum wage is heading upward. The current federal minimum wage is $7.25 an hour, but if you look at a national map of minimum wages, it’s a hodgepodge of city, state, and federally mandated wages. Currently, the highest state minimum wage is $9.47 an hour in the state of Washington, while four states are still well below the federal minimum wage, hovering closer to the $5.15 an hour mark. Minimum wages close to $10 per hour may seem to be a fairly hefty wage for hourly workers, but that rate is nothing compared to the $15 an hour rate that’s on the horizon for many businesses. In locations like Los Angeles, Seattle, and New York a $15 an hour rate is quickly becoming a reality.

For museum store operators, who must constantly battle budgets to maintain a profitable operation, this increase in the minimum wage will have serious consequences across the entire operation. With increasing minimum wages already being felt, now is the time to start discussing how your operation is going to handle what could be a 30% increase in wage and benefit expenses.

So where do you find the savings or increased income to offset such dramatic increase in costs? Do you cut staff? Do you raise prices? Or do you take another look at technology as an option for improving overall efficiencies?

Chances are your strategy will inevitably have to use some combination of increased costs, reduced staff, and more technology to get the job done. A blog post by Madie Hodges on Kabbage.com made four suggestions for dealing with a rising wage: Know Your Bottom Line, Invest in Your Employees, Use Automation, and Adjust Pricing.

Knowing your bottom line is a critical component to running a successful operation, regardless of the prevailing wage law. The more you have a handle on the business’s financial picture, the better you’ll understand options and opportunities. A wise investment in your employees also makes a lot of sense. If your employee is going to cost you more, then you need a maximum return on your investment. That means hiring and training the right person. Engaging in and investing time in the new hire process to bring the best bang for the buck will pay dividends over the long haul.

Using technology as a hedge against higher labor costs may be a double-edged sword. It certainly comes with its own costs, both in time and money. But, it can bring greater efficiencies and new ways of conducting business. If your workers on the sales floor can handle transactions using a handheld mobile POS system, then you may be able to use fewer employees as you improve your customer’s experience.

Of course, you can (and probably always will) adjust prices to maintain your profit margins. But, don’t forget that minimum wages hikes will also affect your suppliers. They’ll also be coping with increased costs on their end. Your museum will also be adjusting admission fees in response to its institution-wide increased labor costs. It will take a deft hand to stock and price your store in a way that won’t alienate your customer.

Fortunately, your customer may be benefiting from a raise in wages. And so it goes…