Raising Minimum Wage and Small Business
Last week Seattle made headlines for raising its minimum wage to a whooping $15 an hour. That is over $5 more than the current mandate and nearly $8 more than the federal rate of $7.25. When the debate over minimum wage is raised, often times big box corporations come to mind—those corporations where the CEO makes more in a month than the entire rest of the work force makes in a year. But perhaps what should come to mind are small businesses. After all, more than 50% of the American workforce is employed by small businesses.
Minimum wage laws are designed to stop corporate greed but they can negativity affect small businesses. With rising minimum wages, small business owners may not have the revenue to hire employees, thus stunting their growth and at the same time rising unemployment. Many small business owners in Seattle already have said that they expect to have to lower their payroll—that includes layoffs and cutting hours.
This is not solely because of the few minimum wage employees whose pay will go up. Over 50% of small business owners across the country already pay more than the federal minimum wage rate, averaging at about $10 an hour. But a $5 raise is significant especially when you think of whole pay structures that will be affected. Employees who are higher up will also need raises to preserve the existing pay structure. In the end, the current minimum wage will affect the whole company and that might be too much for some small businesses to handle.
With such a drastic increase, one has to wonder if anyone was thinking about small businesses. How will entrepenurers deal with the increase over time, and how will Seattle’s ruling affect the minimum wage rates all over the country? Of course one can only speculate about these answers and not all small business owners are opposed to the change.
Some argue that raising the minimum wage will positively affect the economy. When people have more money to spend, they spend more money. Providing livable wages for employees causes a happier work force. There is plenty of research that suggests that the more satisfied employees are, the higher their productivity will be. So is it better to have a few really good employees or a lot of unhappy workers?
Regardless of the current minimum wages, all businesses should look into providing the basic needs of their employees. A happy worker makes for a more profitable business and that is one thing we know for sure.
Sources:
Lobosco Katie. “Business owners divided on minimum wage” http://money.cnn.com. 28 Jan. 2014.
Lobosco Katie. “Coping with a $15 minimum wage in Seattle” http://money.cnn.com. 4 Jun. 2014.