On January 1, 2014, 13 states increased their minimum wage by at least $1 per hour. Over the next three years, the Senate has proposed to raise the minimum wage from $7.25 to $10.10 per hour in small increments and then it will be adjusted for inflation. While this is just a proposal (and likely will turn into a bill in the White House) it is not yet set in stone and economists all of the way to small business owners are discussing it at length. As the increase of minimum wage does cause inflation on every aspect of the economy, this is not just an issue for business owners but an issue for everyone who buys groceries or gas or even goes to a movie theater. Everything will be affected, though perhaps not for the worst. The debate rages on.
Some of the increases that have already taken place have affected small businesses more than the economy has let on. Some businesses owners are afraid they will have to shut their doors because an increase in the minimum produces “a trickle up effect” and every employee will expect a raise in salary to represent their current station in the company. While some small business owners are afraid that the increase will inevitably cause job cutbacks and services or goods will increase in cost, others business owners see it as an opportunity to show their employees that hard work is appreciated. The large spectrum of opinions on this matter is constantly evolving.
One point is that younger and less experienced employees are not worth the $10/hour wage and will therefore be unemployable with low work ethic and lack of maturity not warranting such an income in the eyes of most businesses, but the truth of the matter is that inflation will take over either way and everything will increase. Some experts believe that this is a moot point and resent the myth that minimum wage earners are mostly teenagers and say that employees earning minimum wage aren’t teenagers looking for extra income but people with families and bills to pay that make up at least 50% of the household income.
A Gallup Poll in November of 2013 found that 6 businesses in 10 believe that the minimum wage increase will harm their business. However, 76% of The U.S. public approved of an increase to $9/hour. Some say that increasing labor is only incentive for small business owners to find a way to decrease labor costs, mostly causing jobs and either increasing work-loads on current employees or finding technological alternatives, which are available. Also, an increase in labor could decrease the number of entry-level positions and make it harder for college graduates to find jobs right away, something that is still an issue after the 2008 recession. Benefits have also been a huge point in the debate, stating that employees will have to decrease benefits even more after the new healthcare law caused them to be re-evaluated last year.
Everyone can agree that this is as much as a moral debate as an economic one. As we are in the early stages of this increase, I say it is mostly a political debate with each side (right or left, increase or not) using statistics, studies or out-right myths to prove their point. Will an increase propel low-income families out of poverty? Will it cause small business owners to declare bankruptcy? There seems to be a different answer from every mouth-piece but as we know, the people this is truly about have little say-so in the matter. Eventually the minimum wage will increase. The economy is still fragile but less so than in recent years. If not now, when? Life will continue and I truly doubt an increase will cause doors to shut tomorrow, but there will be effects on every level of the economy. Just make sure that you are prepared and be smart about your financial decisions, but that is not such a different faction than every other week, month and year.