Minimum Wage Hike: Will It Help Or Hurt?
A national minimum wage increase is on the table for 2021, embedded within the $1.9B coronavirus relief legislation, leaving many small business owners conflicted about what that means for their recovery and revenue. This is a complex issue, one we urge legislators to fully understand before enacting, because it has the potential to negatively impact many small business owners who are fighting for their survival.
Ultimately, we want what’s best for all small businesses, which means ensuring that decision-makers hear your opinions and insights to see the whole picture and vital details.
Minimum Wage Hike: Economy Boost or SMB Bust?
Below, you’ll find an in-depth look into the complexity of a blanket minimum-wage increase, from those who are worried their businesses won’t survive it, to those who believe paying livable wages has more benefits than downsides.
We’ll also examine the various effects it might have on specific industries, and how an increase could potentially be funded on a government level.
Then we’d like you to chime in with other points that you need your legislators to understand. Tell us how an increase might make a difference for you and we’ll make sure policymakers hear what you and other small business owners are saying.
Details Behind The Proposed Wage Increase
Let’s start by looking closely at what’s being proposed.
President Biden wants a gradual increase of the federal minimum wage from $7.25 to $15/hour, between now and 2025.
He’s also proposing the tipped minimum wage allowance be removed for service industries, banning restaurants and the like from paying employees below minimum wage.
Both of these measures have attracted vehement advocates and critics.
Lifting People Out Of Poverty
If passed, this would mark the first federal minimum wage increase in over a decade.
Ultimately, the stated goal of the wage increase is to ensure that Americans are being paid a living wage, where a full-time worker can afford rent, food and other essentials.
Proponents of the increase predict that, once it’s enacted, it would lift 1.3 million Americans out of poverty.
Supporters also point out that many essential workers are currently being paid a “non-livable wage,” and that the raise would demonstrate the country’s appreciation for their crucial work.
The hope is that over time, it will result in overall economic recovery, by giving workers money to spend at local businesses.
Quite A Jolt Predicted For Key SMBs?
We turned to our members to find out what real small businesses owners are saying about the proposed legislation. Results are based on an Alignable poll conducted last week (2/13-2/17/21) among 5,089 small business owners.
- 51% of small business owners say that if passed, the $15/hr minimum wage legislation will have a negative impact on their business.
- 35% of those respondents predict that the negative impact will be significant.
It’s important to note, many small business owners already pay employees well above minimum wage -- 42% of those surveyed said they would not be affected by the legislation for that reason.
The remaining 7% of business owners believed that the minimum wage increase would be good for business, citing an overall boost in economic health as the reason. In fact, 18% of minority-owned small businesses predict the minimum wage increase would have a positive impact on their businesses and their communities.
Kicking Restaurants When They’re Down?
Members of the restaurant industry, already devastated by the events of the past year, feel this legislation could be the death knell for many restaurants.
The removal of the “tip credit” allowance, which made minimum wage exceptions for employees to account for the tips they received from customers, has restaurant owners scared for the future.
One restaurant owner who took our survey echoes the sentiments of 64% of his peers. He feels that the tip credit removal will be the final nail in the coffin of an industry that has already faced so much hardship.
“We already pay our non-tipped employees more than $15 per hour. What will crush us is paying tipped employees $15 an hour and removing the tip credit. That’s game over. We would have to fire the servers and put iPads on the tables. It’s the only way to survive. We already pay our servers $8 an hour, but $15? This will be the end of the restaurant business.”
CEO of the Massachusetts Restaurant Association agrees, adding that “Tip credit is the critical fight. It works and should never change. But the immediate piece is that the Wage Act should not try to be pushed through under reconciliation as there is no chance to change anything. In fact, I believe it is not even allowed to be considered in reconciliation.”
What Would Happen To Already-Devastated Retailers?
Another industry disproportionately targeted by this legislation is retail. There are two facts of modern life that retailers wish legislators had taken into account prior to pushing forward with what many of them consider reckless legislation: vast differences in the cost-of-living across the country, and the fact that many teens and young adults find their first jobs at retail businesses. We asked Ken Giddon, owner of New York City-based men’s retailer Rothmans, for his perspective.
“A single minimum wage for the entire country is a flawed idea,” Giddon told us. “The cost of living is so dramatically different by region. I do believe in a minimum wage, but it should be decided on a state by state system.”
He added that he believes in an age- based system. “There should be one minimum wage for those under 21 years old and another one for people over 21 years old. That way, businesses like mine can add part-time and summer help without breaking the bank. It also deals with the living wage issue, as younger folks are generally not supporting a family, but primarily supporting themselves.”
Can The Feds Help In Other Ways?
While few argue against paying employees a liveable wage, it is easier said than done for many business owners especially in the midst of a pandemic. Several unanswered questions remain, including:
- Is it possible for the federal government to partially subsidize this wage increase in the short-term, while businesses get back on their feet?
- Are there alternatives to raising the minimum wage that still allow for employees to make a living?
- Is this really the best timing for this legislation, as it could limit employment opportunities as restaurants and retailers try to get back on their feet in the next year or two. If they are mandated to pay higher wages, naturally they’ll hire fewer people.
Many argue that an expanded EITC (earned income tax credit), that subsidizes the difference between current and raised minimum wage, could help make that dream a reality.
What’s Your Take?
Clearly, this is a challenging issue to resolve and small business owners have a wide variety of opinions from “we’re already paying well above $15/hour” to “eliminating the tip credit could ruin my business.” Regardless of your position, we hope you’ll reach out to your elected officials and share your perspectives, so they fully understand its impact.
At the same time, we invite you to share your perspective below in the comment section, so we can share this article and your sentiments with the press and legislative contacts we engage with regularly on behalf of our members. With your help, we all can make a difference. #StrongerTogether
Comments (31-40)
I already pay my employees over that amount and also provide them with a week of sick leave and vacation time, as well as quarterly bonus's. By doing that my employees stay with me and are loyal. One of my daughters works two jobs where she makes much less than $15/hour and she has to go to the local food pantry to get her food. She does not work full time again yet because it is unskilled labor so I end up paying for her health insurance and rent many times because there is no way that she can pay those items on what she makes. Paying employees a good living wage means that you do not have as much turnover and it saves money in the long run for the employer.
There’s a lot to talk about from this article as a business owner. I’m a farmer who already pays above minimal wage trying to reflect what items should cost at the end for the consumers. I’ve put all my capital and time in my business and yet to get a pay check.
Six years ago to bring in electrical for my operation would have cost $3,500 to $4,000 Today it cost $14,500 to $15,000. We try to plan things out on the farm but when things go up so fast we can’t get ahead to stay up with it.
So in order to keep our prices down and competitive we would need infrastructure setup so we have at least a place to take our products. This would help the community at large creating jobs and a place for wholesalers to buy produce while keeping prices down.
I could keep going but I’ve got to get something more done.
Just imagine yourself living on less than 15.00 per hour which would require someone to get a second job. I might have to expect higher level of job perfromance for that wage, but I would not want to hire anyone who did not deserve to make a living wage. In this time of higher cost of living, I can't imagine justifying paying someone less.
If the minimum wage is increased, regardless of the amount, the only way employers who use unskilled labor can afford it will have to increase their prices. Those who purchase from this company will have to increase their prices. It's a vicious cycle. Minimum wage is intended for entry level employees, not for long term employment. It will not help the targeted group as all prices will increase.
Most of our employees earn $15 now. If "minimum" goes up it is a reflection on their rate. Most have been with us for many years so they are going to push us for significant increases. We will have no choice but to raise our prices. Not good for the economy or our business during times like these.
Hasn’t been raised in ten years. Some people can only get min wage jobs. This is so far below poverty level income. Lower wages means we need many more programs to make up the income gap. Bite the bullet and pass it. This will have ZERO effect on my business.
What should we really think about is besides a $15 minimum an hour how does that impact the owner salary that’s probably over 100,000 maybe 200,000 does it have an impact on the owners vacation home up north or maybe in Florida really it’s about doing what’s right for your employees because if you do not treat them right they will go somewhere else where they can be treated right
I am against the wage hike. I pay my employees/contractors based on merit; knowledge, experience, dedication, in other words, i reward them when they go above and beyond. This will be a great burden on employers, it will force them to either reduce their workforce, thereby reducing their production and it will affect their revenue. Employee moral, incentives & production also go out the window. While I do agree $7.50/hr needs to increase to at least $8/hr; I do not agree raising the mandatory wage to double what it is right now, even if it's over the next 4 years, is the answer. IF there are Other changes that benefit the employer, tax benefits, then perhaps a gradual increase, again, based on merit, would be beneficial to all.
NOT A GOOD IDEA.
Why: because while, to those wage earners, they might believe they are getting a raise, this would be something nationwide and not specific to them, which means: it would be inflationary. So the goods and services wage earners in this income zone think they could buy more, they actually will end up buying less, because all business affected by this forced wage increase will RAISE their prices, so clothing, food, and many other things that presently now have a reasonable price will skyrocket the second this forced wage increase goes into effect. It is a political maneuver created to make people believe that certain political groups are on their side, in hopes of them voting for them, when in reality it is bad for our country as a whole. Don't be duped by political factions trying to manipulate you and your vote. Always opt for deflationary (rather than inflationary) options.
Would you be able to survive, as the bread winner of your abode, on $15.00 per hour or worse yet, less?!
I have paid helpers up to $15 or more in the past 5 years, which as a small business owner of 53 years, was the first time I could afford to hire help.
If you cannot pay hired help $15 or more per hour you have no business hiring someone to do your work for you.
Be fair to others. Give them the parameters of what is expected of them. If they do not work out. Let them go and hire someone whom wants and is willing to do the expected work.