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?

By Sharon McLoone |  August 13, 2007; 6:00 AM ET Regulation Legislation
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Comments

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hmmm, the incompetent head of Home Depot was fire after driving the stock prices down and losing market share. He got a 230 million dollar good bye gift. Now Mr. Incompetent is head of Chrysler.


But we think paying someone 6 bucks an hour is going to close businesses?

BS.
If you can't afford the help,do it yourself.

Posted by: B.Wlilliams | August 13, 2007 9:41 AM

Elevation Burger in Falls Church recently raised its prices, and it has a notice posted that blames various inflationary factors. One factor it cites is that, while it pays its employees more than minimum wage already, the minimum wage hike has raised their supplier costs.

Posted by: Tom T. | August 13, 2007 10:28 AM

When I was a girl in the Midwest I never had a part-time job that paid more than the minimum wage.

My sons have worked in similar food industry jobs and both have started out several dollars above the minimum.

I think the impact may depend a lot on where you are located. I can't see that it relevant around here because so few jobs seem to pay that rate.

Posted by: Ann R | August 13, 2007 3:13 PM

Thanks for remembering to seek comment from a group representing the interests of low-income workers.

Oh wait. You didn't.

Why is this article only about the impact on small businesses? What about the impact it will have on the bottom line of households? Keeping small business in the black is a very important concern, but it's also important that everyone in the nation can find work that pays enough for them to support themselves. This minimum wage "hike" doesn't even come close.

If McNews is all the Post can serve up, maybe it's you guys who should be making minimum wage.

Posted by: rapiertwit | August 13, 2007 6:13 PM

Ted Kennedy's proposed minimum wage increase to $9.50 an hour in the second half of 2009 is needed to get minimum wage workers with two dependents out of poverty.

I would hope it would soon pass in Congress and in many state legislatures. Raising the minimum wage is a way to fight poverty that adds more revenues to governments, reduces welfare payments as it draws more people into the workforce, and gets more and more people over time accustomed to regular work.

Posted by: State Rep. Mark B. Cohen (D, Pennsylvania) | August 17, 2007 8:02 PM

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