Reaction to the Minimum Wage Increase
The nation's federal minimum wage got a boost late last month and the small business community appears torn over its impact.
H.R. 2 boosted the wage from $5.15 to $5.85 per hour beginning July 24. The minimum wage hike will be phased in to ultimately reach $7.25 in 2009.
The U.S. Chamber of Commerce, a lobbying group whose membership represents businesses of all sizes, released a survey July 26 finding that nearly 60 percent of small business owners will not be able to off-set the cost of the wage increase.
The same day, Sen. John Kerry (D-Mass.), who chairs the Small Business and Entrepreneurship Committee, released a statement praising the wage increase and citing a 2006 Gallup poll finding that 86 percent of small businesses wouldn't be impacted by an increase in the minimum wage. "We must invest in our workforce to stimulate small business growth," he said.
The National Association of Small Business, which does not favor an increase, notes in an issue brief (pdf) that most small firms paying minimum wage are typically in highly competitive industries with low profit margins.
The NASB argues that "an increase in wage for one set of workers can lead to a false sense of entitlement that the wages for all workers should be increased, which is simply not sustainable for many small businesses."
Bill Dunkelberg, a former dean at Temple University's business school and chief economist for the National Federation of Independent Businesses, said the wage hike will hurt small entities because the increase "requires firms to pay more money for the same work, and a company has to either take it out of its bottom line or raise prices for customers."
He notes that while minimum wage workers should be pleased with a fatter paycheck, a wage hike makes it harder for new entrants to the workforce to find summer jobs or starting jobs.
"A store may think again to pay someone $15,000 a year to sweep a store" if it's too expensive for them, he said. "Most people learn how to be productive members of the workforce by learning skills on a starter job and if you're denied that opportunity then you'll never be able to get started."
"I can't see any positives of a government setting prices or wages," said Dunkelberg.
Small Business readers - has your business been affected by the recent wage increase?
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