Small businesses balance rising inflation with employee cost of living
WDAY News talked with Swing Barrel Brewing to see how the historic inflation has impacted them.
MOORHEAD — With the consumer price index at a 40-year high — up 8.6% — employees and employers are facing tough decisions.
WDAY News talked to North Dakota State University economics professor James Caton about how business owners can keep up.
"If we have 8% inflation, employers are going to have to expect to pay their employees about 8% more," Caton said.
The inflation rate is a direct tack-on to the cost of living, so employees expect their wages to match that. Unfortunately, it's a process that takes a lot longer and is a lot more complicated than many people might think.
"In the short run, inflation is moving faster than wages. It actually allows employers to employ more people," Caton said. "But as employee wages and employee expectations of inflation catch up, that means that it's more costly for the employers to hire these employees."
Some big name brands have raised wages to combat inflation, as well as the staffing crisis. Names like Target, Aldi and Verizon have all raised wages to between $15 and $20 per hour.
But for the little guys like Swing Barrel Brewing in Moorhead, it's tougher to do that as they try to stay afloat.
"Input through output, right? So raw materials coming in all increased Jan. 1 or even a little bit later, and we try to keep that cost down for the customer. So we're eating some of that, not trying to pass it on," said John Kapla, co-owner of Swing Barrel Brewing.
As of now, Kapla said he can only afford to pay his employees Minnesota minimum wage plus tips, along with some free beers to bring home.
Of course, he wants to pay more, but as of now, keeping the business afloat is priority No. 1.
"We were born in the pandemic, so we really know nothing else. So I think all we had was hurdles to overcome, just like everybody, right? So it's not just us. But I think that's all we've known," he said.