Yesterday, I had a conversation with a client who is part owner of a clothing manufacturer with his family. They employ roughly 30 people. (as a courtesy, I won't name the state the company is located in)
They have been struggling for years to keep the doors open for this company and quite frankly haven't been able to to price it's product competitively due to union labor contracts. They already shut down their Ohio plant years ago and have been hanging on for years with this other plant
He told me that in 2006 the union passed along an $11,000 year increase in the union run health care coverage ($367 / employee). In addition, the union passed along another $11,000 increase in the union run pension plan.
The state this plant is located in had the infinite wisdom of passing it's minimum wage law which kicks the minimum wage up significantly in the next year (I won't say the amount for the reasons above). While his company does not pay minimum wage, the base rate in the contract is pegged to the minimum so any increase in the minimum is an automatic increase to his employees.
As my client says, "if we raise our prices more than 3% per year we might as well hand them our competitors business cards".
So now confronted with a 20% increase in the cost of labor within one year, they are moving their production to Columbia or China and will have the plant closed by the summer. Oh yeah, the city this plant is located in isn't exactly a hot bed of economic opportunity for low skilled laborers.
So for all you do gooders trying to help out the little guy, congratulations, you just helped out some poor guy in Bogota.
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