This is the final part in a 4 part blog series.
What is it about business that would allow a large part of the population to believe that raising the minimum wage to $15 an hour, a 40% increase, would not have an adverse impact on business?
There are two things that I can identify that would leave people ignorant of commerce. First is the invisible backroom. Second is the orchid-daisy phenomenon.
Until recently, most restaurants did not have a visible kitchen operation. Now that some part of the kitchen operation is visible, never the dishwashing part of the kitchen, we are often, in the San Francisco area, able to see that nearly all of the kitchen staff is Latino.
In most businesses the people who are visible are less than half of the actual staff necessary to provide the services we are buying. Even at McDonalds or Starbucks, where we believe we can see most of the employees, we do not see the cleaning and maintenance staff, we rarely see management and never see the accounting and supply chain staff.
Behind the visible people there is a long line of invisible workers who are involved in both the supervision and the delivery of products and services. Even at a gymnasium the part of the staff that works on membership, accounting, maintenance, regulatory issues and marketing are not visible.
Therefore because we see so little of the real part of the active businesses we deal with, we remain in the dark about the functioning of business. This is the main reason that people could be naive enough to think that an increase in the minimum wage by 40% would not reduce the function or survival of the businesses around them.
The second reason is that people cannot see what business is about in what I call the orchid-daisy phenomenon.
Some businesses are like orchids. They are only able to work in the rarest and most delicate environmental circumstances. Raise the rent and they close their doors. Let me give you 2 categories of business that are in the orchid realm.
One was a shop that sold locally designed handmade clothing for women. This store was on the outskirts of a well to do neighborhood where it found a low rent space. Over time as this orchid attracted significant foot traffic other traditional businesses began to emerge around it. After several years of retail growth around this orchid, the rents went up and the store that created this magnetic attraction for customers was replaced by a bank that could afford the high rents. The orchid was gone. It couldn’t find a comparable low rent neighborhood that its clients would go to.
In another instance, a brilliant engineer did hand manufacturing of wind generators in a fairly small factory floor in a rough neighborhood. As he acquired more manufacturing equipment to build his truly elegant and orchid like wind generators that were sold around the world to businesses and agencies that needed specialized heavy duty wind generators, similar manufacturing businesses moved into the area. With more businesses it became safer because of the increased traffic flow of workers and visitors. As the neighbourhood became safer and more manufacturing moved in, the original orchid was forced to move out of the city into an area where the rent was low. But it also turned out that his marketing and relationship to customers was inadequate. That orchid failed.
Daisies are in my mind ‘weeds’. Businesses can also be weeds. Commerce is carried on in any circumstances where there are customers. A prisoner can get virtually anything he wants through the chain of suppliers within every prison, if he has the money. It is one of the great attributes of commerce that when customers can be found businesses will grow to satisfy those customer demands. Legal-illegal. That is the weed-daisy nature of commerce.
A business that has 5 employees servicing regular clientele when it is disrupted for some reason will find that it can change hours, change its prices and its overhead in order to continue servicing those clientele even with 2 employees.
There is another aspect of commerce that is not visible. Invisible because illegal businesses are almost always invisible.