Record Low Unemployment Is Pushing Wages Up For Small Local Ice Cream and Frozen Custard Shops
If you run a small local ice cream or frozen custard shop in the U.S., then record low unemployment levels shouldn’t have gone unnoticed. Low unemployment is great news for the nation as a whole. Conversely, it can be bad for some small businesses like independent ice cream shops. While more people enjoy employment in productive work, there are fewer opportunities for smaller local shops to get low-cost labor. Consequently, this begins to eat into their profit margins.
Per Trading Economics, the U.S. unemployment rate was 3.7% in June, 2019. This and the previous month were the lowest for decades. After almost the longest economic expansion in history, the number of available idle workers is at a record low. Why is that a problem? The wages are picking up making it difficult for small business owners to meet payroll. As companies demand more labor from a dwindling supply of workers, they begin to compete against each other. As a result, they must increase the wages of their employees.
After a decade of stagnation, wages rose substantially in 2018. They are expected to grow throughout 2019. Many businesses can absorb the minimum wage increase effects – particularly their payroll expense. Unfortunately, this is creating a hardship for small, local businesses. Higher wages equate to many firms raising the price of their ice cream and frozen custard. This will most likely hurt their competitive position with their “big box” competitors!
Raising prices isn’t always the answer. A lot of firms are offering cheap alternatives and economies of scale. On the other hand, small operators struggle to keep costs down to a level that customers can accept. Rising wages may hurt small local shops in the US.. by forcing them to raise prices higher than franchises who can absorb these costs.