Raising the Minimum Wage

Will a higher minimum wage hurt entrepreneurs? Many say no.
Magazine Contributor
2 min read

This story appears in the October 2006 issue of Entrepreneur. Subscribe »

Increasing the minimum wage will hurt small business, or so the mantra goes. But will it? A recent Wells Fargo/Gallup survey of entrepreneurs reveals 46 percent support a minimum wage increase. Additionally, 86 percent feel a higher federal minimum wage wouldn't affect their businesses. "The minimum wage is no longer much of a hurdle for most small business owners," says Scott Anderson, a Minneapolis senior economist with Wells Fargo. "Most already hire at wages above the minimum wage."

The federal minimum wage has been $5.15 an hour for nearly a decade, and it now represents a mere 30 percent of the average U.S. hourly wage. "The real value of the federal minimum wage is the lowest it's been in 48 years, with the exception of 1989," says Stephen Mangum, a labor market expert and professor of management and HR at The Ohio State University in Columbus. An increase "is not likely to have as much of an effect on unemployment as in the past."

For many entrepreneurs, paying minimum wage isn't an option. "You get what you pay for," says Karen Masterson, 46, founder of three-year-old Big Fresh Café, a Framingham, Massachusetts, restaurant that starts pay at $8.50 an hour. She feels a higher wage improves recruiting and retention.

At least 21 states now mandate wages that exceed the federal minimum. A proposed minimum wage hike died in the Senate this summer. Congressional Democrats see this as a strong election-year issue and are pushing ballot initiatives in states where vulnerable Republican incumbents are up for re-election.

Masterson wonders if business groups citing potential damage to small businesses have her interests at heart. "It's almost more politically correct to put it on the backs of small business than to say, 'It's really going to hurt McDonald's and Wendy's,'" she says. "The bottom line is, [a minimum wage increase] certainly wouldn't affect us."


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