The Minimum Wage and Small Business
Earlier today, House Democrats pushed through an increase in the minimum wage – from $5.15 to $7.25, as part of their first 100 hours initiatives. Many conservatives and pro-business groups are concerned that the minimum wage will hurt economic growth by forcing small businesses to raise prices or hire fewer workers. And President Bush has signaled that he’d sign the bill only if it includes a tax break for small businesses. So it’s well worth inquiring - particularly in an age of huge deficits - whether a tax break for small business would actually be needed to offset the new wage – or if small businesses would do just fine without it.
Former Secretary of Labor Robert Reich concludes that small businesses don’t really need the tax break to stay competitive. Because almost all small businesses compete locally, their competitors “will be paying the same minimum wage increase.” What that means is that no business will be disproportionately affected; rather all businesses will pass the added costs equally onto consumers. Reich continues:
Besides, it's not really an increase anyway. The current minimum wage was enacted ten years ago, and inflation since then has eroded its value so much that the new proposed minimum is more like an inflation adjustment than a real increase. Most small businesses charge prices that have risen with inflation. It's only fair that their employees' wages should rise with inflation, too.
In fact, a minimum wage hike may actually help small businesses. Evidence from states that have already increased their own minimum wages suggests that a modest increase convinces more people to enter the labor market -- people like retirees, spouses, or teenagers who wouldn't bother working at a lower minimum wage. With more people willing to work, small businesses have more choice of whom to hire. That means they can find more reliable employees, and reduce costs associated with turnover.
let him veto it then let the senate republicans refuse to override that veto. many of the nation's largest labor markets already have MW's higher than the proposed federal minimum. if anything, the repugs ought to jump all over this bill since the indexing provision essentially locks the MW into a level lower than first enacted while simultaneusly taking the regular raising of the MW off the table for future polical debate.
January 10, 2007 3:35 PM | Reply | Permalink