Jim asked me to reference this article as he plans to discuss it on the big radio show this morning between 9 a.m. and noon on WTIC. The minimum wage has been a frequent topic here at RVO, and this story illustrates another – yet foreign – example.
From Crain’s Chicago Business.
Newly public Knowles Corp. faces a bumpy start
Knowles, maker of miniature speakers and receivers, was spun off this month from its conglomerate parent, Dover Corp. The Itasca-based company enjoyed a sixfold burst in revenue between 2005 and 2013, to $1.22 billion. But the company already is warning that first-quarter revenue will slide 4 to 6 percent from a year ago, with sales in its key mobile consumer electronics segment decreasing as much as 9 percent. Operating profit is projected to fall 15 to 20 percent.
As a result, the stock has moved but a little from its debut at $31.23 on March 3 to $31.02 on March 14.
“We face some headwinds early this year,” acknowledges Jeffrey Niew, 47, Knowles’ president and CEO. “But we think those headwinds will shift behind us after the third quarter.”
So what’s a company to do?
The company is moving its hearing-aid production from China to the Philippines this year after its 1,000-member Chinese workforce won minimum wages of $3.50 an hour, up from 60 cents an hour when Knowles arrived in 1996. “Our labor costs will be halved in the Philippines,” estimates Mr. Niew, who is closing plants on other fronts to consolidate production in fewer places.
I’ve said this a few dozen times now. When costs increase for any business – including government mandates – the owners/managers must make decisions. Connecticut Gov. D.P. Malloy (D) and Lt. Gov. Wyman (D) can tell us all day long the government mandate “will not put any kind of burden on our employers,” but that does not make it the truth. It’s a lie.
Read and share this previous post, Minimum Wage… President Obama, where does the extra $3 come from?