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Minimum wage increase will hurt countless small PA businesses

It seems as if lawmakers in Harrisburg have quickly forgotten about steps taken by the Wolf administration during the COVID-19 pandemic that crippled many of Pennsylvania’s small businesses and ultimately forced far too many to close their doors entirely. Right now, the Pennsylvania General Assembly is debating another move that could once again crush the commonwealth’s greatest job creators — a minimum wage increase to $15 an hour.   

As a small business owner, it has been difficult to listen to the tone-deaf arguments of those who support raising the minimum wage. The reality is that many of these supporters have never signed the front of a paycheck, let alone run a business. It’s time for lawmakers to stop placing obstacles in the way of Pennsylvania’s small business owners still trying to survive in an uncertain economy borne from the pandemic, which also has led to record-high inflation.  

Sadly, my wife, Tracey, and I speak from experience on this issue. Prior to the pandemic and the draconian unilateral measures taken by the Wolf administration, Tracey owned a female fitness center. Through hard work, she built a small business that provided 50 jobs and a membership roll that reached as high as 1,000. Then the lockdowns and government mandates came.   

Within the first year that these unprecedented measures were implemented by the unwieldy Wolf administration, my wife’s small business lost more than half of its members. She tried everything to make changes in a new post-pandemic world, offering virtual and smaller classes. But it was never the same. She was forced to shut her doors in October 2021.  

Just like that, everything she and her team had worked for was gone. The truth is this didn’t have to happen. The government overreached with its mandates, killing small businesses in the process. And they’re poised to do it again with the minimum wage.  

A new study published by the National Federation of Independent Business (NFIB) found an increase in the minimum wage to $15 would decimate small businesses, leading them to lose $7 billion and 57,000 jobs over the next decade.   

We don’t argue against workers obtaining consistent housing and resources for themselves and their families. However, mandating a wage increase will not breach that gap. Supporters of a minimum wage increase in Pennsylvania will tell you that it will lift people out of poverty. The reality is that the government forcing business owners to give a “wage increasewill, in short order, be nullified by the inevitable increase in costs to the consumer.   

Supporters of this bill are not looking at the downstream negative impact a minimum wage hike will have on small businesses. The current $15-per-hour employee who has been working for a company for several years is earning this wage because of merit, experience and increased skills. Naturally, new employees receiving the same wage will lead to existing ones wanting more. Ultimately, this will cost small businesses millions of dollars — or they’re going to cut hours. 

The marketplace has already moved the needle on wages in Pennsylvania. We don’t need our state government interfering with how we run our businesses. If the proposed minimum wage increase is signed into law, the economy will adjust as it relates to wage earners. But small, local business owners will be driven out of the market. Raising the minimum wage threatens to put thousands of small businesses across Pennsylvania out of business. 

 My wife and I know firsthand how government mandates, shutdowns and overreach can crush a small business and the livelihoods of the owners and their employees. Quite simply, government needs to stay out of the way of small businesses. Let the marketplace determine the wage rates and let small business owners run their businesses. 

 

Jeff Wakeen is co-founder of the Go Big Small Biz Network, which provides advocacy, education and communication for Pennsylvania small businesses. For more information, see: gobigsmallbiz.com 

 

Small businesses need affordable energy

Nothing gets done without energy. From powering computers, credit card machines, or heavy manufacturing machinery to providing the electricity needed for heat, air conditioning, or lighting, to creating buildings, furniture, and office supplies to fueling trucks to deliver — energy is the common denominator that sets our world in motion.   

There is a reason we call staying in business “keeping the lights on.” Energy is the cost of doing business, and for small businesses – many operating on thin profit margins – every penny counts.  

During the pandemic, small businesses across the country were devastated, especially in the early months when changing mitigation orders forced many job creators to close their doors for an extended period, leading to serious workforce challenges. As we continue to recover from that challenging time, small businesses need affordable and reliable energy to rebuild and thrive.    

Here in Pennsylvania, we are uniquely situated to be the solution to powering our lives and livelihoods affordably, effectively, and efficiently. Thanks to the Commonwealth’s prolific natural gas reserves, Pennsylvania is now one of the leading natural gas-producing states in the country – second only to Texas. Natural gas has bolstered the state’s diverse energy portfolio. As natural gas exploration and extraction has grown, Pennsylvania residents and businesses have benefited through lower energy costs and increased economic activity.  

By breathing new life into once economically stagnant communities, the industry supported a boon of downstream opportunities and helped to grow cottage industries. Niche markets and businesses have developed to help support the industry. Additionally, there has been a positive impact on ancillary businesses. In new drilling areas, restaurants, hotels, and mom-and-pop shops have seen increased activity and a boost in sales. And within this bustle, increase in natural gas use has also been environmentally beneficial by significantly lowering greenhouse gas emissions.  

In February, I had the opportunity to testify before the House Majority Policy Committee about the need for affordable, reliable energy for small businesses. As I noted in my written testimony, energy companies will not invest if they are met with hostile rhetoric and policies from our lawmakers  

Unfortunately, there continues to be a vocal group of elected officials on a mission to essentially shut down natural gas production in our state – driving away jobs, economic opportunity, and low energy prices and putting our state’s position as an energy leader at risk. The small business community is not advocating for government oversight and regulation to go away. There is a need for a reasonable regulatory environment. However, balance is necessary. Lawmakers should work to streamline the process to remove unnecessary burdens and duplicative requirements and paperwork on job creators.  

It is not an “either/or” conversation when discussing environmental concerns and energy needs. We can have a competitive energy climate with fair and sensible regulations.    

We have the opportunity for a renaissance of American manufacturing, bringing businesses and manufacturing back to the nation and the Commonwealth. But to do so, we need smart policies that encourage growth and promote competition. The solution starts here. 

Greg Moreland is the state director of the National Federation of Independent Business (NFIB) in Pennsylvania, a non-profit, non-partisan, organization representing 13,000 small businesses throughout the Commonwealth. 

 

PASSHE seeks funding to boost entrepreneurs, small business workers

Pennsylvania’s State System of Higher Education (PASSHE) is seeking state funding in the amount of $112 million to address the state’s need for entrepreneurs and small business workers. 

Funding would be used to train students in six in-demand, high-growth jobs, business among them. PASSHE universities would invest $19 million of the $112 million to provide direct financial aid in the form of university-funded scholarships to business students. The scholarships would save students an average of $5,000 per year. To serve more students, an extra $2 million would be used to enlarge business programs. 

PASSHE Chancellor Dan Greenstein said in a statement that for Pennsylvania companies to be successful in a competitive marketplace, they need employees with business training and skill. 

“The combination of their knowledge, passion, and dedication helps to drive the commonwealth’s economy and create sustaining jobs,” said Greenstein. 

Greenstein added that unless more low-and middle-income students can afford the education they require, Pennsylvania will struggle to fill needed jobs. 

“Investing in our students to reduce their cost to a business degree will unlock the door of opportunity for more Pennsylvanians and expand the pipeline of talent from the classroom to main street and rural communities,” said Greenstein. 

PASSHE stated in a press release that Pennsylvania needs approximately 8% more business professionals by 2030. Filling those jobs will require employing thousands of additional people with knowledge gained by a business degree. 

As large corporations impact significantly economic growth, employees with strong business skills are highly sought after. The same is true of small businesses, which number 1.1 million in Pennsylvania, employ nearly half of the state’s private sector workforce. 

“State system universities are ready to partner with the governor and legislature to educate more business professionals and entrepreneurs,” Greenstein said.

New funding available for historic small restaurants

Restaurant owners across the U.S. know the impact that the “Backing Historic Small Restaurants Grant Program” can have on their community. 

Over the past two years, 50 historic restaurants have collectively received $2 million, and their owners have used the grant funds to make improvements to their businesses that have led to positive impacts on their surrounding areas. 

Restaurant owners have acclaimed the first two installments of the grant as being uplifting for the entire community, their neighbors raving about the preservation work. The grants have given owners the opportunity to update their establishment, impressing visitors, and increasing their number of dine-in customers. 

The third installment of the “Backing Historic Small Restaurants Grant Program” was announced Thursday by the National Trust for Historic Preservation and America Express. The grant will see $1 million in funding shared by 25 recipients across the country. Grants are funded by American Express and administered by the National Trust for Historic Preservation. Each grant recipient will receive $25,000. 

To be eligible for a grant, independent small restaurants must operate in historic buildings or neighborhoods, contribute to their neighborhood’s history and identity, and have a diverse story about cuisine and community in the U.S. Restaurant owners can submit formal grant applications through 11:59 p.m. ET on March 12, 2023. The deadline is the same for community members planning to submit nominations. 

“We’re proud to give small restaurants the resources they need to grow their businesses and continue their legacies for years to come,” American Express Vice President Community Affairs Alice Lin Fabiano said in a statement. 

Backing Historic Small Restaurants is part of American Express’ Backing Small initiative, which focuses on supplying financial support and additional resources to help small businesses meet crucial needs. The Backing Small initiative has $17 million in funds committed through 2024 to support underrepresented and financially vulnerable small business owners and entrepreneurs. The initiative includes grant programs, mentoring support, and technical assistance. 

As small businesses faced defaulting on rents, property managers worked behind the scenes to lend a hand

The economic disruption caused by COVID-19 didn’t just lead to some apartment dwellers falling behind in their rent. Commercial tenants who lost significant business or had to shut down altogether for a time were affected, too. 

Local property managers took a hands-on approach to the problem, dealing with tenants individually to work out payment plans. In some cases, plans have been amended, as pandemic circumstances continue to be fluid. 

COVID-19 has presented some real challenges, said Brian Finley, chief financial officer of LMS Commercial Real Estate. 

LMS manages office and medical buildings and shopping centers. Overall, that’s about 90 properties, including many grocery-anchored centers, and almost 700 tenants, with the majority of properties in the Susquehanna Valley, Finley said.  

A year ago, Pennsylvania Gov. Tom Wolf issued his closure order, and several hundred of LMS’ tenants – which didn’t qualify as essential – had to temporarily shut their doors. 

Many were mom and pop businesses, he said. “They were on the front lines of that and didn’t have deep corporate pockets to fall back on.” And when they can’t pay the rent it sets up a domino effect, Finley said, because the landlords who own the buildings need the tenants’ rent to make mortgage payments on those buildings. 

So LMS worked with tenants on a case-by-case basis to come up with strategies, he said. An agreement to defer rent on a short-term basis was a common solution. 

“Not unlike other economic downturns, the life cycle of commercial real estate management requires ingenuity,” Finley said. “We had to work a lot of long hours.” 

What made this experience and the response time different was the sudden onset, he said. Normally, recessions result ina gradual slowdown, but this was like being “knee deep in the ocean with a tidal wave bearing down,” Finley said. “It came all at once.” 

LMS didn’t ask if tenants were applying for Paycheck Protection Program loans, but many did, he said. Several paid their deferred rents early because of the PPP funding. 

Some large corporate retailers filed for bankruptcy to restructure and reduce store count, Finley said. 

Of LMS’ 700 tenants, about 250-300 were significantly affected during the shutdown, he said. Most of the mom-and-pop stores managed to stay in business. 

Some merchandisers, including grocery store chains, did really well, Finley said. 

Right now, the vast majority of LMS’ tenants are doing better than they were six to eight months ago, he said. “There are still some challenges for restaurants and bars until the occupancy restrictions are fully lifted,” he said. 

Eric Stankiewicz, a property manager with Rock Commercial Real Estate, had similar experiences. Once the pandemic hit, tenants received individual attention to come up with a rent payment plan. For example, Stankiewicz said, the rent could be frozen with the expectation that it would be paid later. Tenants only had to cover base operating expenses. Rock Commercial Real Estate has properties in York County with a foothold in Lancaster County. 

Rock’s contract is with property owners, some of whom were able to let rent payments go for a bit. Others can’t be as flexible. 

The key is to balance what property owners can afford to give as far as short-term rent reduction and what renters can handle, Stankiewicz said. 

“In April and May 2020, pretty much all I did was amendments to leases,” he said. In some cases, with retail tenants, he had to do it more than once. That was mostly restaurants, Stankiewicz said. 

The contrast with retail and everyone else was clear. There was less lease modification with office tenants, he said, and industrial tenants were considered essential business, so didn’t shut down.  

Michael J. Lorelli, High Associates Ltd.’s senior vice president, commercial asset management, agreed that the pandemic effect depended on the type of real estate. 

A developer, broker and manager of office space, industrial real estate, retail properties and apartments in Lancaster, south central Pennsylvania and beyond, High Associates has a managed portfolio that includes major corporate centers located throughout the Eastern U.S. 

Lorelli said retail was hit hardest, with a mandatory shutdown and then occupancy-level limits. Meanwhile, industrial tenants were relatively injury free, he said, although some experienced supply chain interruptions. 

Like LMS and Rock, High Associates designed custom plans for tenants in financial distress, Lorelli said, and immediately put them in touch with resources, including information about accessing the Paycheck Protection Program, as soon as the need was clear. 

In some cases, special payment schedules were set up, or 2020 late charges were waived, Lorelli said. 

Last spring, with many businesses reeling either from the lockdown or a drop-off in sales, “we were really concerned,” Lorelli said. 

But after working with its tenants and leaning on programs such as PPP, only two of 250 – both retail establishments – closed their doors, he said. 

However, if tight restrictions had gone on longer, it might have been a different story, Lorelli said. “We were fortunate.” 

Currently, “things are picking up,” he said, with a lot of optimism as vaccine production has kicked into high gear. 

Still, what the landscape will look like post-COVID-19 is hard to say. Could employees start returning to the office after working at home, or will office tenants begin downsizing because they need less space? 

Even industrial tenants, which did well, had to make adjustments, he said, with some developing more diverse supply chains. That, in turn, will leave them better prepared for future global interruptions. 

Gov. Tom Wolf’s tax cut will hurt small business, make state less competitive, business leaders say

In his annual budget address on Wednesday, Gov. Tom Wolf outlined a $40.2 billion spending plan he says will reduce taxes for working class families and invest nearly $2 billion in new resources in the public education system.

But, his plan to raise the personal income tax on households earning above $84,000 for a family of four, was quickly denounced by business leaders who say it will crush already suffering small business owners.

Under the governor’s plan, 33% of Pennsylvanians would see their income tax increase 46%, from 3.07% to 4.49%. For example, a married couple with two children would pay no PIT if they make less than $50,000. The same family making $84,000 receive a tax cut.

But a four-person family with household income of $100,000 would pay an additional $1,400 a year.

Rep. Torren Ecker (R-Adams/Cumberland) said that the tax increases are an additional punch to the gut for small businesses attempting to recover after the pandemic.

“The governor’s proposed personal income tax increase of nearly 50% would take direct aim at the paychecks of Pennsylvanians who have been hit hardest by the pandemic,” he said. “I also find it alarming that the governor’s plan would harm the businesses that are already struggling to recover from the closures since most small businesses themselves pay the personal income tax.”

Wolf said that, while Pennsylvania’s personal income tax rates are relatively low and a good deal for residents who are financially secure, lower income residents pay the same rates.

A chart provided by the Pa. House Democratic Appropriations Committee details Gov. Tom Wolf’s proposed personal income tax increases.

The tax increase would add nearly $3 billion to the general fund budget, which would help pay for increases to basic and special education funding, the state’s subsidized child care program and more.

“When you go to file your taxes every year, you have to pay the same exact rates as I do,” Wolf said. “I want to help working families get ahead by reducing their taxes. If you’re married with two kids, and you earn less than $84,000 a year, I suggest we give you a tax cut.”

The Wolf Administration argues that the tax cut will help more than 400,000 business owners, saving over $240 million. In a statement to the Central Penn Business Journal, Lyndsay Kensinger, Wolf’s press secretary, said that the average tax decrease would be $600.

Wolf’s proposed personal income tax hike is not the only policy that the business community is wary of. Legislative priorities listed in the proposal include raising the state’s minimum wage to $15-an-hour, adding a new tax on the natural gas industry and a requirement that related groups of businesses combine their income for tax purposes.

“Many of the policies recently outlined by the governor as among his top legislative priorities for the year… will only increase the cost of doing business in the state and make the Commonwealth less competitive overall,” said Gene Barr, CEO and president of the Harrisburg-based PA Chamber of Business and Industry.

While many businesses may see a decrease in taxes through Wolf’s plan, businesses that are small enough to receive the cut would also be the most likely to see adverse effects from an increase to the minimum wage.

Wolf’s budget plan also calls for a 25% decrease in Pennsylvania’s Corporate Net Income Tax, an increase of funding to the state’s workforce development system to help workers impacted by the pandemic find work, and the legalization of recreational cannabis.

While he is glad to see the Wolf Administration acknowledge the state’s high corporate net income tax of 9.99%, Barr said that the state would need to enact further decreases to stay competitive with other states.

Giant announces $500,000 in grants

Carlisle-based The Giant Company announced it will award $500,000 in grants to 110 small businesses across the state to support Pennsylvania’s food supply chain during the COVID-19 pandemic.

The emergency grant program, part of a partnership between Giant and Harrisburg-based non-profit Team Pennsylvania, was first revealed in April and was originally planned to total $250,000.

Giant said on Monday that it decided to double the funds in the program after receiving hundreds of applications.

“Reviewing more than 500 applications from small businesses across the Commonwealth confirmed what we knew in our hearts: that the pandemic is having a devastating impact on our small business community,” said Nicholas Bertram, president of The Giant Company.

The grants range from $2,500 to $15,000, with more than half going to PA Preferred companies and special designations such as LGBT-owned, veteran-owned or USDA defined socially disadvantaged.

The range of businesses were chosen to represent multiple areas of the food supply chain from orchards and produce farms to craft breweries and coffee roasters.

Recipients of the grants include:

  • Danikacatering LLC DBA Danika’s, Dover
  • Dawg Gone Bees, LLC, Hanover
  • Founders Market & Co., Lancaster
  • Grand Illusion Hard Cider, Carlisle
  • Harrisburg Dairies, Inc., Harrisburg
  • Lancaster Hummus Co., Lancaster
  • Mellow Mink Brewing, Inc., Mechanicsburg
  • Mickey’s Wholesale Pizza, York
  • Paulus Mt. Airy Orchard, Mechanicsburg
  • Simply Ghee LLC, Lancaster
  • Sweet Mama’s Mambo Sauce Jen Heasley’s Cooking With the Pros LLC, York
  • Terranetti’s Italian Bakery, Mechanicsburg
  • TorchBearer Sauces LLC, Mechanicsburg

Managing a crisis of pandemic proportions

Mandy Arnold, CEO of York-based Gavin. PHOTO/MARK DELOATCH

When Mandy Arnold helps one of her clients with crisis communication, there is usually a trigger that causes them to seek her help planning for the future.

Because both non-essential and essential businesses alike are dealing with the fallout of COVID-19, companies don’t need to communicate to shareholders that the crisis affected them, but how they will get through it, said Arnold, CEO of York-based Gavin.

Weeks into the temporary closure of many of her clients’ businesses, Arnold and her staff talk to owners about what they should be doing to make sure they will reopen and that their employees and customers will still trust them.

“Everyone is in the same circumstance so you won’t be judged for being in this crisis,” Arnold said. “You will be judged for how you communicated and your behaviors through it.”

Gavin is a branding and communications agency with offices in Harrisburg, York and Lancaster. Gavin offers crisis communication along with public relations and marketing.

The information that Arnold and her staff have been relaying to businesses has changed significantly as the pandemic has developed.

Previous crisis communication tips related to COVID-19 were based around speaking with staff and customers about how the virus wouldn’t impact business dealings. But as the crises worsened, Gavin’s messaging expanded to prepare clients, including small business owners, prepare for having a staff member test positive for the virus, and keeping brand loyalty among customers that may not be buying a product for months.

Maintaining a brand
Many of Gavin’s clients are reaching out to the firm for help to prepare for the inevitable positive test or death of an employee, something that Arnold said her clients are keenly aware could have lasting impacts on how their company is viewed by the public.

“(Our) clients want to respond in the most responsible way that protects the privacy of the individuals affected while following the safest processes to protect their employees, customers and the public,” she said. “Most clients are fearful of the impact a positive test may have on the perception of their brand in the long term and are doing everything in their power to mitigate exposure for their employees and customers.”

To prepare for the impact of coronavirus spreading into a business, Gavin recommends consistently reminding employees of safety protocols, and customers of the safety measures in place for their sake.

No-contact delivery, disinfectant processes and the wearing of masks and gloves by employees are all measures that should be relayed to customers, she said.
For brand’s still closed by the state, communication to customers is particularly important to avoid a behavioral shift in product use, which can take place when clients are inactive with a product from 30 to 90 days.

For businesses deemed “no-life-sustaining” by the state, Arnold says it’s important to build relationships with clients through content creation such as podcasts.
“We’ve launched live-streaming broadcasts, videos and podcasts for several clients in the midst of this crisis with success,” she said, adding that creating content during the quarantine takes creative solutions since Gavin would normally use a manufacturing floor or a room at a company’s headquarters to film its executive team.

Most messaging coming out of the quarantine has taken the shape of self-recorded footage of CEO’s—Arnold point’s to footage of reporters from national news broadcasts filming from their living rooms as a point of reference.

Learning from larger companies
One third of Gavin’s clients have fewer than 500 employees and the firm’s larger, global clients have dealt the best when it comes to crisis communication, said Arnold.

A portion of Gavin’s clients have already experienced business closures due to pandemics, which Arnold said helped those companies better understand how to pivot during a random change in business operations.

The unprecedented size of the pandemic has created holes in every crisis communication plan, no matter the size of the business. To Arnold, that means it’s more important than ever to pay attention to other markets and see how other organizations tackle the problem.

“I am consistently surprised about how people aren’t paying attention to other markets and thinking we are isolated from what is happening in other markets,” she said. “We had the unique perspective of seeing other communities go through it so communications and leadership teams have to pay close attention to what is happening in those markets.”

Businesses can benefit from tweaks to paid time off

Evolving methods for offering paid time off to employees are leading to a simpler process, greater trust and more productive people.

Experts in human resources are recommending that businesses look into adopting a program that allows employees to pull from a bank of time off that they can use however they please instead of receiving specific days for sick, vacation and personal time.

The classic approach to paid time off, or PTO, includes an accrual system that gives employees a number of PTO days based on how long they’ve worked, categorized by sick, personal and vacation time.

Abandoning the classic model in favor of one with more flexibility could say a lot to employees about how much an employer trusts them, according to Karen Young, president of HR Resolutions in Susquehanna Township.

“I don’t want an employee to feel like they have to lie to me that they are sick when they just need a day off,” she said.

Deme Learning, a family-owned publishing company in Warwick Township, Lancaster County, changed its model to a PTO bank after years of offering the benefit under the traditional method. Steve Petersheim, Demme Learning’s HR Generalist, said the company also got rid of accruals to show employees that leadership didn’t think they would abuse the system.

“Giving them the benefit right away shows that we trust them,” Petersheim said. “If you use it all and quit, don’t worry about it. We think you are going to stay and we want you to have what you deserve.”

Millennials are more likely to work for time off and are less worried about pay, according to Young. She said business owners should look at being flexible for their employees, not only in the PTO they offer but during work hours.

“There’s nothing to say that a 40-hour work week has to be done in five days,” she said. “We get into this thing that the schedule has to be done nine to five because employees are coming to us but what’s important is that the work gets done.”

Giving employees the time to schedule days off improves work quality and can solve issues with attendance, said Amanda King president of Operam HR in Camp Hill, Cumberland County.

“We used to look at vacation time as a luxury and we now understand that time away from work creates a more productive work force,” King said.

The employees of Lancaster-based marketing firm Identify LLC go a step further. They take a sabbatical every seventh week in order to recharge. Identify’s clients are aware that the entire business closes for the sabbatical, but CEO and founder Ben Bachman said they generally understand that it helps make staff more creative and excited to work with the clients.

Bachman said that the point of providing employees a week of unpaid leave on top of their vacation time was to create a business culture that promoted creativity.

“It’s not just about time off. We were trying to create a culture where we want you to invest in your passions,” Bachman said.

The company’s sabbatical is also based around trust since employees are expected to finish work before the business shuts down for a week. Employees are instructed to keep an eye on their communications in case an emergency crops up with a client, but Bachman said that Identify has yet to have such an emergency.

Sabbaticals like that are rare among business but are a great idea, according to Young.

Like most benefits, there are costs associated with making the sabbatical possible but Bachman said it has proven attractive to employees.

“I feel like we stole people from bigger agencies because they saw that time off as more attractive than other benefits packages or $10,000 a year,” he said.