Higher Minimum Wage? Small Business Doesn't Mind

Surprisingly, many small businesses support a higher minimum wage
A worker uses a rotary cutter to shape a piece of limestone in Columbus, Ohio Photograph by Ty Wright/Bloomberg

President Barack Obama’s recent proposal to raise the federal minimum wage from $7.25 to $9 an hour by the end of 2015 has an unlikely ally: a sizable swath of America’s 6 million small employers. Historically, lobbyists representing small business almost unanimously condemned any increases in the federal minimum wage, arguing employers would be forced to fire workers. Now, with public anger over income inequality deepening and economic research challenging the notion that higher wages suppress employment, a growing number of small business advocates support a hike.

Feb. 14 (Bloomberg) -- University of Texas Professor of Economics Daniel Hamermesh discusses the impact of raising the minimum wage on the economy and jobs creation. He speaks on Bloomberg Television's "Market Makers." (Source: Bloomberg)

That includes dozens of business groups and networks composed primarily of small business owners such as the Main Street Alliance, the National Latino Farmers & Ranchers Trade Association, and the Greater New York Chamber of Commerce. “Our women [business owners] who pay a living wage have an advantage over their larger counterparts who don’t,” says Margot Dorfman, chief executive officer of the U.S. Women’s Chamber of Commerce, an organization with 500,000 members, three-quarters of whom are small business owners. “Whether Obama’s proposal is high enough or the time frame is fast enough is the question.”

Taking inflation into account, a worker earning a minimum wage today is worse off than one who made the base hourly wage of $1.60 in 1968. “It’s just really ridiculous to think that business owners can’t pay today at least as much as what they paid four decades ago,” says Holly Sklar, founder of Business for a Fair Minimum Wage, which has attracted support from more than 4,000 small business groups and owners. Main Street businesses suffer if “the economy is falling apart around them,” she says. “If the customer base is undermined because wages are so low, they feel it directly.”

Two of the nation’s biggest small business groups, the National Federation of Independent Business and the National Small Business Association, oppose any increase. “Ben Bernanke isn’t printing the money. It has to come from somewhere,” says Jack Mozloom, a spokesman at the NFIB. “If you artificially increase demand in the form of minimum wages, you’re going to suppress demand elsewhere, and that’s going to come directly from the employer’s side.” The International Franchise Association is against any increase, too, though Vice President of Government Affairs and Public Policy Jay Perron says it’s not yet a primary concern for its members.

Both sides of the wage debate acknowledge that most small businesses pay more than the federal minimum to attract qualified workers, and 19 states already have wage floors that are higher than $7.25 an hour. Because a hike would predominantly affect businesses (large and small) in low-wage industries or less prosperous regions of the country, “you are talking about a relatively small part of the business community,” says Todd McCracken, president of the NSBA, who argues that any wage hike is problematic. “I think this is being proposed primarily because the politics work for the president here.”

John Schall, whose Mongolian barbecue restaurant Fire + Ice in Harvard Square employs around 40, starts his workers at $10 an hour. The argument about a minimum wage hike imperiling small business “never rings true,” says the longtime restaurateur. “If somebody came to you with a business plan and said, ‘If I can pay $8 an hour, this is a great business and you should invest in it, but if I have to pay $9 an hour, I’m screwed,’ nobody would” take the business seriously, he says. “It would be way better if the minimum wage was higher across the board for everybody, and everybody had to pay an entry-level position at a living wage.”

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