Trying to Understand the Impact of Minimum Wage Hikes on Small Businesses

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Does the battle over the minimum wage pit employees against small-business owners? That was the notion put forth on the Real Clear Politics website recently. In an essay titled “Living the Wage? Try Living the Small Business,” Tom Bevan, a co-founder of the site, ridiculed Democratic politicians who had embarked on an effort to understand how people subsist on minimum wage.

Several officials, including Jan Schakowsky, a congresswoman from Illinois, signed up for a week-long challenge called Live the Wage. For that week, they attempted to spend just $77, which is the effective take-home pay for someone making minimum wage, according to the advocates who want to raise it. Mr. Bevan called this effort “a gimmick cooked up by the progressives at Americans United for Change.”

It would have been more laudable, he wrote, if Rep. Schakowsky had spent her time “trying to understand the real world consequences raising the minimum wage would have on small businesses in her district — and all across the country.”

Mr. Bevan’s argument is this: “Those actually ‘living the wage’ in America — those working full-time and paid hourly at minimum wage or less — represent a very small portion of our society.” Citing a report on the minimum wage by the Bureau of Labor Statistics, Mr. Bevan puts that portion at just 2.1 percent of all hourly workers over age 16, or 1.2 million people.

There’s an interesting implication here: Mr. Bevan argues that while few working adults would benefit from an increase in the minimum wage, many small businesses would still suffer. But if a lot of businesses end up writing bigger paychecks, that’s because raising the minimum wage will likely affect many more workers than just those currently making it.

Mr. Bevan “is basically trying to minimize in every way the author knows how the significance of the number of people affected if the minimum wage were raised,” said Gary Burtless, an economist at the Brookings Institution (who also occasionally writes for several Real Clear sites).

For example, people earning more than the current minimum wage, but less than the new one, would also have to paid at least as much as the new minimum. And according to Mr. Burtless, still others will get raises “because their employers may want to maintain some wage differential between the people who earn the (now higher) legal minimum wage and the workers who hold somewhat more responsible jobs.”

The nonpartisan Congressional Budget Office recently estimated that if the federal minimum wage rose to $10.10, a total of 16.5 million workers now paid $10.10 an hour or less would make more money. A Brookings study concluded that up to 35 million workers, or 29 percent of the workforce, could see wages rise if the federal minimum wage increases to $10 an hour.

That’s a lot of workers, and a lot of business owners signing bigger paychecks. In his article, Mr. Bevan spoke to one business owner, an unidentified restaurateur, who said he would have to “cut back on our staff” if he had to pay more money. But if Mr. Bevan had talked to more owners, he might have heard differing views. A Gallup survey last fall found that small-business owners, by a more than two-to-one majority, were not likely to cut their workforces in the advent of a minimum wage increase. Nor were they likely to cut benefits or reduce capital spending.

The same poll found that a majority of business owners said that raising the minimum wage (in this case, to $9.50 an hour) would hurt most small-business owners. But even so, the owners were nearly evenly divided on whether they supported it. Half opposed; 47 percent approved.

Though the two largest small-business trade groups, National Federation of Independent Business and the National Small Business Association, both staunchly oppose a minimum wage hike, a host of emerging liberal small business advocacy groups support it, including Main Street Alliance, the American Sustainable Business Council, and the Small Business Majority.

How will Congress know whom to believe? On that score, Mr. Bevan makes an excellent suggestion. Elected officials really ought to spend some time standing in the shoes of small-business owners to understand how policies like raising the minimum wage affect them. If you’re a small-business owner willing to host a politician for a day for the benefit of empathy, or if you’re a government leader who wants to better understand your small-business constituency, send me an email at robb.mandelbaum@nytimes.com.

We will be happy to connect you.

source-http://boss.blogs.nytimes.com/2014/08/11/trying-to-understand-the-impact-of-minimum-wage-hikes-on-small-businesses/?_php=true&_type=blogs&_r=0

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