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Why Small Business Is Divided Over Hiking the Minimum Wage

Raising the federal minimum wage to $9.50 would be bad for small businesses, yet almost half of small business owners support a hike, according to a new survey of about 600 owners published today by Wells Fargo (WFC) and Gallup.

Among the findings: Forty-seven percent of respondents, most of whom generate less than $2 million in annual revenue, said they would approve of a law setting the minimum wage at $9.50, even though 60 percent said the policy shift would hurt most small businesses. Support for higher wages was also at odds with findings that roughly 30 percent of respondents would cut staff and reduce worker benefits to offset higher wages.

What’s behind the discordant sentiments? After President Obama proposed raising the minimum wage to $9 from its current $7.25 by 2015, we reported on the increasing support for a wage hike among small business advocacy groups. Backers of a wage hike pointed to growing unease with the gap between the rich and poor, and a way to reduce worker turnover. Another practical-minded argument: Higher salaries for the lowest-paid workers could help boost consumer spending.

It’s worth noting that increasing the minimum wage would mostly affect companies in industries accustomed to paying low wages, such as fast-food restaurants. That helps explain why the International Franchise Association has opposed efforts to raise the minimum wage. It also means that many small business owners won’t be directly affected by the issue—a point worth remembering when supporters and opponents of a wage hike say they speak for small business owners.

Clark is a reporter for Bloomberg Businessweek.

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