Friday, August 23, 2013

Mr. Hickey Responds to the Minimum Wage Issue

I wanted to allow everyone to see Mr. Hickey's response because many times people don't look into the comments.  This is his response in full and I appreciate the honest response.

This makes me smile. Are you seriously suggesting raising someone's pay .50 cents an hour will make them now able to afford daycare and that this will help my business? (I said i had a waiting list - my problem isn't trying to get one more kid in the building.) You could raise the minimum wage $5 an hour and they'd still need state subsidy to afford daycare. If you are making minimum wage you can't afford daycare. We have 125 kids or so in our daycare not including our after school program and 49 of our staff last year were part time . Health insurance premiums and mandates means we have to back off the number of full time positions and rely more on part time. 9 of those part time workers last year were below $8.50/ hour.

However that low wage DOES NOT factor in is a substantial benefit I offer employees.... They can use the daycare themselves for $1-2 per hour per kid. If we raise wages, those types of benefits will be reduced or eliminated. Actually they've already been reduced. Several years ago I offered free daycare to employees. Do the math on what that benefit is worth for a single mother of two working a low wage at our daycare. Trust me it's huge.

Here's another thing. Before you jump to conclusions that I have trouble keeping good people because I don't pay them, come visit and see that we have high morale and low turnover. We are eight years old and have people who've worked here since the start. We take care of people and they will tell you that - we've fixed or replaced employees cars, paid rent, given food, gift cards, given bonuses and free daycare at Christmas to employees and struggling parents.

Did you know that no daycare in town is a moneymaker? In fact, unless a daycare is subsidized by a church or a company (for Wells Fargo or Citibank or Sanford Employees) or an in-home daycare, that a daycare can't even stay open unless they discontinue offering infant daycare. I calculated a a few years ago we were losing $100 a day in one of our nurseries. This is because the adult/baby ratio is 1:5. You lose money at that ratio even when the church/company or home daycare owner subsidizes the facility/building. To make up for this we have older age kids with a 1:10 ratio and there is margin there. You'll notice some daycares only have a token amount of babies and mostly toddlers and older kids. They make up for the money lost in infant care by starting after school programs as we have. If we put a notice on our sign that we have infant openings we'd have 20 new babies here tomorrow.

My point is the minimum wage of some part-time employees is hardly a factor in daycare profitability - it makes it even harder to make it go. Please understand that judgments that we pay people low wages is hardly fair to the enormous amount of subsidy and benefits employees and parents are offered here and in other church and corporate daycares. For us it's a ministry first and a business second. In the places where it's only a business people drop infant care to a minimum even though that is what is most needed.

He does make some good points that I completely agree with.  First, running a daycare is a difficult calling and not an industry that will make most people rich.  I understand that their are some mandates, especially on infants, that make it harder for a daycare to make a profit.  I think the adult/baby ratio at a lower level is a good thing, but that really has nothing to the minimum wage issue that I I brought up.  
Second, I want to make sure that I do not believe that his employees at the daycare are not hard working or loyal.  I am glad to see several ways that Mr. Hickey looks out for his employees.  The reference I made with increased productivity and job loyalty was to connect to the idea that an increase in minimum wage can increase productivity and job loyalty.  As a conservative writer with Forbe's magazine put it:
This is why I think conservatives should favor this policy. It makes workers work harder, earn more, and thus claim less of other welfare benefits that are comparatively ”free” from the recipients standpoint but costly from the governments standpoint.
My poor wording at the time may have made it seem that your minimum wage workers may leave for other higher paying jobs.  It appears that out of the 49 staff members, you only have 9 at minimum wage (or at least below $8.50 an hour).  I don't know the specific situation of your business and was only putting out realistic hypotheticals to show that an increase will not destroy a business.  
I am still confused having costs for payroll costs will increase by .65% will mean that you will have to take away all of those benefits.  That was the real issue I wanted to raise.  It is a claim that many people have threatened with a minimum wage increase.
As to the fact that people on minimum wage simply can't afford daycare, I know several that need to make it work.  In some cases, one spouse may be maybe earning a little more than minimum wage while the other is working at minimum wage.  What does $1.25 an hour increase mean to a minimum wage worker (The current minimum wage in South Dakota is $7.25 an hour) working 35 hours a week?  A $2,275 increase.  
Thank you for the information the you provided Mr. Hickey.  I hope that your daycare continues to grow and hope the best for you and your employees; however, I think that you made the best argument for raising the minimum wage when you state, "You could raise the minimum wage $5 an hour and they'd still need state subsidy to afford daycare. If you are making minimum wage you can't afford daycare."  Maybe we should begin to take steps so that an adult doesn't have to choose between finding daycare for a child and maybe finding a job.

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