Introduction
After the economic crisis of 2009, many businesses across the world that enjoyed steady rates of economic growth have faced the problem of changing income levels of the general populace. Many people have lost their jobs, salaries were cut, and the prices for certain commodities rose exponentially. Many enterprises were unprepared for decreasing sales rates and the realities of the market, which dictated that continuing production and growth at the same rates as before the crisis was impossible. The purpose of this presentation is to examine the effects of national minimum wage levels, economic growth, and recession on changing income levels on a business enterprise, and provide recommendations on how to reduce operational and economic losses during times of crisis.
The Effects of National Minimum Wage Rates on a Business
There are two different conceptions surrounding the national minimum wage rates. Some researchers suggest that a higher minimum wage rate would increase the buying power of the customers, thus enabling them to spend money on products other than the bare necessities. This trend, in theory, is expected to bolster the market. Other researchers, on the other hand, observe that high minimum wages pose a danger to small business, which cannot afford to optimize the number of workers as much as large businesses do. They claim that an increase in wages would inevitably cause price growth, which would reduce the effects of any NMW increase.
The data provided by the Economic Policy Institute, however, shows that increased NMW ratios do not necessarily lead to employee optimization. In the USA, the states with higher than the federal minimum wage rates show a higher number of business establishments, increased numbers of employees, larger annual payrolls, and higher average payroll per worker.
The Effects of Economic Growth on a Business
It is a general consensus that economic growth is beneficial for business growth. Economic growth is associated with decreased poverty rates, decreased unemployment, increased quality of life, and a greater willingness of the customers to spend more money on a variety of goods. However, not all businesses profit from economic growth in equal measure.
During times of crisis, people become less choosy about the quality of a product, as the price and basic functionality become their primary concerns. In times of economic growth, customers are allowed to choose, meaning that competition grows as well. That competition could potentially force some businesses to lose their market share.
In a period of economic growth, companies that produce premium-class products profit the most. Economic growth enables the middle class to afford luxury items that were previously available only to the wealthy, thus greatly expanding the potential market.
Recession
A recession is the opposite of economic growth. During a recession, the majority of the population are unable to afford expensive and quality items, instead focusing on purchasing only the basic necessities in order to maintain an acceptable level of the quality of life.
Small businesses tend to suffer the most during a recession as they have lesser tools and resources to reduce the losses and start making a profit again.
Strategies for Surviving Recession
- Becoming indispensable. Provide products that the majority of the population needs even in times of recession.
- Exercise bargaining power. Recession hits everyone indiscriminately. It is possible to force suppliers to lower the prices, as they would not want to lose a customer in times of crisis.
- Employee optimization. Analyze the existing employee engagement plan and refit it so that the same amount of work could be done by fewer employees.
- Work process optimization. Acquiring new technologies and improving the speed and productivity of the employees would allow producing more without expanding the employee pool.
- Expansion of foreign markets. Exporting products to richer countries that do not suffer from a recession would benefit the company.