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Distributor's Link Magazine Fall Issue 2015 / Vol 38 No4

40 THE DISTRIBUTOR’S

40 THE DISTRIBUTOR’S LINK Woodruff Imberman An economic historian by training, the author, Dr. Woodruff Imberman, is President of Imberman and DeForest, Inc., management consultants. He has published many articles in Distributor’s Link on improving managerial effectiveness, supervisory training, improving employee productivity, and on implementing Gainsharing Plans in the fastener industry. For further information on these subjects and the articles, please contact him at Imberman and DeForest, Inc., IMBandDEF@aol.com. HOW FASTENER COMPANIES CAN INCREASE PROFITS WHILE PAYING THE NEW HIGHER MINIMUM WAGES Scheduled Increases In Chicago And Elsewhere Fastener distributors and makers nationwide will soon face the same problems now confronting Chicagoland ones: how to maintain profit margins when having to pay higher wages due to new local ordinances raising minimum pay far above the federal minimum of .25 an hour. For example, Chicago’s minimum wage jumped to .00 an hour on July 1, 2015 from .25. The minimums will increase incrementally to .00 an hour by 2019. Today, most of the cities raising their minimum wage rates are on the West Coast, including Seattle, San Francisco, Oakland, Los Angeles, and San Diego. On the East Coast, cities raising their minimums include Portland, ME, New York and Washington, D.C. In between, Santa Fe and Albuquerque, NM, Kansas City, MO, Louisville, KY and, as I have said, Chicago, have raised their minimums. Tomorrow, who knows how far this trend will spread? These new minimums will make higher productivity a must for fastener distributors and makers. The industry has never been known for paying high wages in their warehouses and distribution centers, where labor is about 25 percent of operating costs. These new rules will not only affect distributors and fastener makes in areas covered by these new rules but also those in next-door communities, because of “ The PITA Factor.” CONTRIBUTOR ARTICLE Those most affected will be: • First, distributors now paying below the new higher mandated minimums. They will be forced to raise their wages as the new local regulations dictate. These distributors will either have to raise prices, improve employee productivity, or accept lower profit margins. • Second, fastener distributors in next-door communities to those directly affected by the new regs. They will be forced to raise their wages to prevent their best workers from jobhopping to competitors paying the higher local mandated rates. Ambitious workers with the drive and “oomph” to make extra efforts for extra pay are most likely to switch jobs. These are the countermen providing the best customer service, and the fastest order pickers. In short, the workers distributors want and need to retain, even at higher pay levels. • Third, fastener distributors within and near the areas covered by the new rules will be forced to raise their entire wage scale for two reasons: first, because their higher skilled employees will demand more than their minimum wage counterparts; and second, because of the egotism and self-respect of these better workers. They view themselves as “better” than minimum-wage workers, and will demand to be paid more. Their sense of entitlement is powerful. Again, boosting employee productivity is the best way to maintain profit margins. CONTINUED ON PAGE 158

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