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Minimum Wage Increase: The Effects On Small Businesses

1226 words - 5 pages

President Obama has approved a plan to increase the Federal minimum wage to $10.10 an hour by 2016. There are those that believe raising the minimum wage will benefit low wage earners and boost their families over the federal poverty line. However, others believe that it will negatively affect the same group of people it is proposed to help. Many believe unemployment will increase due to less job opportunities and employees being let go, and businesses will be put in danger. Small businesses will be in more danger than large business will be. In the United States, a business is considered “small” if there are less than 250 employees and the company sells less than $7 million in receipts ...view middle of the document...

One way in which companies can make up for the profit loss correlated with an increased wage is by decreasing the amount of employees who work for them. Businesses are not going to hire more employees to work for them and they will fire employees who are the least productive. Companies may believe that having fewer employees to pay will seem beneficial to them, but in the long run it may hurt them. With fewer employees working, this means that each one will need a flexible schedule. If one gets sick or injured and cannot make it into work, than another employee will need to be readily available (Walker).
All of the above problems are deteriorated by additional costs for a small business. James Sherk, an analyst in labor economics, mentions that along with the minimum wage going up, employee benefit costs have also risen. This is bad for both the business and the employees. Businesses will be paying more money for each employee to help cover their health insurance, along with a higher wage. They will not be able to expand, or they will downsize because they aren’t going to pay more money for employees (Dunkelberg). For example, a small business that currently has four different locations may have to only stay at one location in order to make more money. This leads to a large amount of employees who will no longer be employed in the business. To save money through paying employees for their work and health insurance, many workers will get fired from their job. This will cause an increase in unemployment rates. The Bureau of Labor Statistics has shown that unemployment increased by .3 percent just from January 2014 to February 2014. If it continues to rise in each month following it will put many employees jobs on the line.
A decreased amount of employment for each business, means decreased opportunities for teenagers to obtain an entry-level job. An entry-level job is usually a minimum wage paying job, mainly small businesses, which require no high-level education or experience. Young adults make up for about 31 percent of the employees who work at minimum wage jobs, while the rest comprise mainly of college students and single parents (Walker). Having experience at an entry-level job allows for teenagers to learn how to work with other employees, develop skills to be successful and can prove to their employers their value to the company. Not only do teenagers work for more experience later in life, many of them work for a common reason, the money. Teenagers work at...

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