Many organizations have studied and presented the potential positive and negative affects that raising the minimum wage could have on small businesses and our economy, resulting in more than one rational opinion, and certainly no consensus path forward.
For example, according to the U.S. Department of Labor (DOL), a review of 64 studies on minimum wage increases found no discernible effect on employment. A June 2014 national poll found that more than 3 out of 5 small business owners support increasing the minimum wage to $10.10. Those that responded believe that a higher minimum wage would benefit business in important ways: 58% said raising the minimum wage would increase consumer purchasing power; 56% said raising the minimum wage would help the economy; and 53% agree that with a higher minimum wage, businesses would benefit from lower employee turnover, increased productivity, and customer satisfaction.
Research and analysis from the Small Business Majority shows that of 500 nationwide small businesses polled, a majority of them already are paying their workers more than the minimum wage and therefore raising the minimum would not negatively impact their business. They go on to say businesses would benefit from a spike in consumer purchasing power due to the dollars those families would have available to them.
On the contrary, many smaller employers believe minimum wage increases will exert upward pressure on all employees’ pay, requiring an increase in overall prices. The Congressional Budget Office (CBO) prognosticated that raising the minimum wage to $10.10 could cost the economy 500,000 jobs. Of those 500,000 jobless employees, businesses could see a decrease in goods and services being purchased. The CBO also showed that businesses would absorb the decrease in consumer demand in the form of increasing their costs of goods and services reducing the average consumer purchasing power.
Lastly, our partners at the National Small Business Association (NSBA) argue that a 5 percent increase in minimum wage would equate to a 2.5 percent loss of all minimum wage jobs. NSBA states that most small businesses that do pay minimum wage are typically in highly-competitive industries with low profit margins, and a nearly $3.00 per hour increase for any employees could be devastating. Therefore, NSBA urges caution in promulgating any kind of federal mandate on small businesses. NSBA asserts that an increase in the federal minimum wage could have a significant, negative impact on small businesses and for those seeking entry-level employment and on the U.S. economy.