Connecticut’s minimum wage ticked up again in January to $10.10/hour as the last stage of a three-year increase bringing the minimum rate up from when it was $8.70/hour in 2014.
For some employers, this nearly 17% increase can lead to labor costs taking up a greater share of your expenses. Even for those who pay more than the minimum wage, these increases can come at a cost, as they tend to lead to further wage gains for others, particularly for other low-income workers earning up to 150% of the minimum wage, as Brookings found in a nationwide study.
As a result, some employers might be tempted to cut costs in ways such as firing staff, reducing workers’ hours or scaling back marketing expenses. Yet these types of money-saving initiatives could end up hurting more in the long-run if customer experience falters and there’s a smaller pipeline of new customers.
Instead, employers should try to offset minimum wage increases by finding ways to reduce energy costs, which does not tend to hurt customer or employee experience.
The Potential to Cut Costs by Monitoring Energy Consumption
Too many businesses overlook the potential for saving money on energy, as it may not seem like something in your control. However, research shows that there is significant opportunity for cost savings with better energy management, such as the fact 30% of commercial buildings’ energy consumption is inefficient or unnecessary, according to the EPA.
By taking a closer look at consumption and finding energy solutions to waste less, businesses could potentially offset the cost of minimum wage increases through this alone. Yet businesses can save even more through a variety of measures such as switching to a better rate class from their utilities or investing in energy-efficient equipment.
All together, these measures go beyond the direct savings from lower utility bills, as smarter energy management can improve other areas such as equipment maintenance, regulatory risk and employee and customer experience. These benefits then lead to further cost reductions and even increased revenue due to happier employees and customers.
Thinking of Energy as a Strategic Resource
Many businesses overspend on energy because decision-making over the utility budget is decentralized, writes Jimmy Jia, Sustainable Energy Solutions Certificate Lead at Pinchot University, in a Harvard Business Review article.
And as the energy landscape has changed with new providers, technologies, and increased regulatory and public scrutiny, better energy management “will involve starting to manage energy as a strategic resource instead of as an expense,” he writes.
Jia suggests appointing a Chief Utility Officer so that companies then have someone clearly in charge of energy management decisions and who can find ways for energy policy to support corporate goals.
Yet even if a company does not formally appoint a Chief Utility Officer, such as if they are a small business without the resources to do so, they can still set a formal energy strategy with clear lines of decision-making responsibility. Just as some businesses do not have a chief marketing officer but still have a clear marketing plan — often with the aid of some form of software for email or social media management — companies can develop a strong energy management plan with the use of energy analytics software (EAS).
EAS provides companies with clear insights into their energy management so that they understand what specifically contributes to their energy costs and can therefore know what to adjust. With a point person to manage this software and implement the energy solutions derived from it, businesses can then get the full benefits of managing energy as a strategic resource.
For example, suppose a factory started using EAS and appointed its head of operations to manage it. The software may then indicate that certain production processes use a disproportionate amount of energy, so the head of operations could then instruct shift leads to work with employees to come up with new energy solutions to reduce operating expenses.
Perhaps an employee notices that a certain production step is unnecessary or a piece of equipment is inefficient. With energy management as the catalyst, they could then have an opportunity to run that up the chain to ultimately implement a company-wide change. Thus, the company could both reduce energy costs while increasing employee engagement, since the employees feel like their concerns are taken into consideration.
Businesses that take this approach to energy management can then not only offset Connecticut’s minimum wage increases but also improve their companies overall.
Request a complimentary energy efficiency assessment to find out how Artis Energy’s RTIS® energy analytics platform can provide you with the visibility and insight to transform energy from a fixed cost into a distinct competitive advantage.