Small-Business Owners Are Split on the Federal Minimum Wage Debate
The federal minimum wage of $7.25 per hour has stayed the same since 2009. But with the majority of states already enforcing minimums beyond that amount, there’s a growing debate about whether the federal rate is overdue for an increase. That debate came into stark focus last year as the “Fight for $15” movement gained traction across the country. The push for this increased pay minimum was highly polarizing, with supporters publicly rallying around the increase and those in opposition decrying the proposal as inevitably harmful to the lowest-earning workers.
When it comes to the question of raising the federal minimum wage, small-business leaders are similarly divided, a recent BizBuySell survey revealed. The survey – which polled over 700 small-business owners and prospective buyers – found that among owners, 47 percent support raising the federal minimum wage while 40 percent oppose it. Another 13 percent said they have no opinion. On the other hand, prospective small-business buyers are much more likely to support boosting the federal minimum, with 58 percent indicating they’re in favor. To truly determine small-business sentiment on the matter, it’s important to examine the reasoning from both sides.
Small-business support for a federal minimum wage increase.
Small-business owners and prospective buyers who said they endorse raising the federal minimum wage highlighted two key reasons:
Positive economic impact: A number of respondents argued that increasing the federal minimum will not only positively impact individual workers, but the economy as a whole. As a surveyed potential small business buyer put it, larger paychecks bring “more economic activity,” while another business owner offered that, “Once people start earning decent pay, spending will rise as well.”
Over-staffing of businesses paying federal minimum: Other small-business owners who support a higher minimum suggested that businesses that only pay the federal minimum are being financially irresponsible by staffing beyond their means. Instead, as one respondent argued, small businesses should concentrate staffing to a group they can afford to pay beyond the minimum.
Opposition to increase minimum wage.
Respondents to BizBuySell’s poll who don’t support raising the federal minimum pointed to several reasons for their opposition, including:
Pessimism about employees’ work ethic: Some owners and prospective buyers see a widespread problem with diminishing employee work ethic, which is lowering business output. They feel this problem will only be compounded by raising the federal minimum. According to one small-business owner, “Higher wage without higher productivity = dead biz.”
Concerns about business competitiveness: Other business leaders said boosting the federal minimum will force them to significantly restructure their organizational models in order to accommodate the increase. These changes would inevitably include raising the price of goods or services, leading small businesses to lose a competitive edge to bigger enterprises.
Shortage of jobs for entry-level workers: Many jobs that pay baseline wages are filled by first-time, entry-level workers like high school students -- people who are financial dependents looking for work experience and disposable income, not a living wage. As one respondent argued, raising the federal minimum will jeopardize these opportunities and “thousands of entry-level high school jobs will vanish.”
The state and local factor.
For many small-business owners and prospective buyers, the question of whether or not to support a federal minimum wage hike is a moot point considering they’re already beholden to higher state and local minimums. As the survey revealed, 53 percent of small-business owners reported that their state or local government had upped the minimum wage in the past five years; among prospective business buyers, 39 percent reported increases over the same five-year period.
Small-business owners and buyers shouldn’t expect these state-based hikes to slow down anytime soon. According to the National Conference of State Legislatures, nineteen states unveiled higher minimum wages at the start of 2017. A notable number of states – including Colorado, Hawaii, Maine and Oregon -- are incrementally approaching $10 an hour, while others -- including Arizona, California, Vermont and Washington – have already reached or surpassed that amount.
Across the country, many states and localities are pushing for the even loftier minimum wage goal of $15 per hour. Currently, California, New York and Washington D.C. all have legislation underway to secure a $15 minimum, while Illinois and North Carolina are following suit. Therefore, regardless of where small-business owners and prospective buyers stand on the federal minimum wage debate, they must begin budgeting for minimum wage requirements trending upward in the near future.