More Small Business Owners Support Minimum Wage Increase

by Mike Hall, May 4, 2006

Associations representing small businesses—along with the usual suspects in the Big Business world—long have claimed that any increase in the minimum wage would hurt business owners, forcing them to lay off workers, hire fewer employees, raise prices or scrimp by on lower profits.

The federal minimum wage has been stuck at $5.15 an hour wage since 1997. In recent years, Republican congressional leaders and the Bush White House have successfully blocked every attempt to boost the wage.

However, a recent Gallup Poll suggests a large segment of small businesses may hold a different view from that of the associations that represent them. Some 50 percent of small business owners surveyed support raising the minimum wage, according to the poll.

For years, business associations have said any boost in the minimum wage would be ruinous for small business owners. According to the poll, 75 percent of those surveyed say a 10 percent boost would have no effect on their business. While that’s a smaller wage increase than what most state and federal legislation seeks, the owners’ opinion that it would have no effect on their businesses is a departure from the end-of-the-world wails from associations such as the National Federation of Independent Business. Several other studies over the years have found that raising the minimum wage even more than that is not harmful to business.

In fact, a new study shows a higher minimum wage actually has a positive impact on job growth. The Fiscal Policy Institute, a nonpartisan research and education group, found that small businesses job growth was higher in states with a minimum wage greater than the $5.15 federal level. From 1998 to 2003, small business jobs increased by 6.7 percent in the sates with a higher minimum wage, compared to 5.3 percent for the rest of the country.

“FPI’s new evidence shows that a higher minimum wage not only benefits workers, but can spur economic growth that benefits small business owners,” says Mark Price, an economist for the Keystone Research Center, a Pennsylvania research group that co-released the report. ”Increases in labor costs, are offset by savings from lower recruitment and training cost, and by greater revenues from increased sales.”

Adds Price: ”Predictions of doom for small businesses are not rooted in reality.”

Meanwhile, grassroots campaigns led by the AFL-CIO union movment are under way in more than 20 states to increase the minimum wage either through legislation or ballot initiatives.

Yesterday in Illinois, the state Senate unanimously approved a bill that would allow workers to collect punitive damages and back pay if the state’s minimum wage law is violated. Currently, if a worker takes a wage claim to court and wins, the employer is only liable for underpayments, court costs and attorneys’ fees. The bill now goes to the House.

In Pennsylvania, one of several states where union and community activists are working to increase the minimum wage, the House already has passed a bill to increase the minimum to $7.25 an hour. The legislation is now before the state Senate.

At the federal level, the Fair Minimum Wage Act (S. 1062 and H.R. 2429) would raise the minimum wage to $7.25 an hour over two years. Click here to become a citizen co-sponsor of the bill, as nearly 100,000 people already have.

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