What Would Increased Minimum Wage Mean for Small Businesses?

A look at the debate over increasing the federal minimum wage, and especially what it would mean for small businesses.

Credit: Bed-Stuy Patch
Credit: Bed-Stuy Patch

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A recent Gallup poll revealed that while 76 percent of Americans favor an increase in the federal minimum wage, currently set at $7.25 per hour, small business owners in general are not as enthusiastic about the proposed hike. 50 percent of surveyed small business owners would not approve of an hourly increase to $9.50.

Announcing his plan last February to affect a raise, President Obama declared that “in the wealthiest nation on Earth, no one who works full-time should have to live in poverty. For businesses across the country, it would mean customers with more money in their pockets."

Would such an increase help or hinder American small businesses?

Clifton Broumand, the owner of Man and Machine, a small specialty computer product business, says that “you need to pay workers enough to survive. I want my employees to have the chance to grow and improve here. I want them to want to stay so we don't have a lot of turnover.”

That’s fine for Mr. Broumand, and he’s welcome to pay his employees more without any federal action. But what about employers who don’t demand a skilled workforce?

Henry Ford doubled the starting wage for his employees in 1914, reasoning that “since it was now possible to build inexpensive cars in volume, more of them could be sold if employees could afford to buy them.”

Conversely, columnist Steve Chapman argues in the Chicago Tribune that an increase in the minimum wage would give employers “a significant incentive to find ways to employ fewer workers — by automating tasks, moving to more self-service, demanding more of each employee, cutting back store hours or closing marginal outlets.”

For an example of how employers might look to automate tasks in the future, you might want to check out Google’s increasing investment in robots. Indeed, Google-sized companies are some of the most important players in the minimum wage debate: the top three companies paying Americans the least are Walmart, McDonald’s, and Target.

Notably, a nonpartisan poll of small businesses indicates that 85 percent of American small business already pay their workers more than minimum wage.

So the clearest thing to say about minimum wage and small businesses may be: They’re not enthusiastic, as businesses rarely are, about new regulations. But overall, they don’t have nearly as much to lose as the giants of retail and fast food.

Every small business is different. How do you think an increased minimum wage would affect businesses in your town? Tell us in the comments or in a blog post.


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