This is a question I often hear from people who don’t own small businesses and occasionally get from an entrepreneur who wonders why we take such a position.
Sometimes they follow with another question: “Why don’t you want to help families who are struggling?”
We do want to help families and any who are struggling financially. But simply raising the minimum wage is not an effective way to end poverty. That’s not just our opinion but a reality backed by official U.S. government research.
According to U.S. Department of Labor statistics, half of those who earn the minimum wage are under 26 and aren’t the main source of family income. [See EPI study on number of workers dependent on minimum wage]
But politicians have seized this issue, clouding the true impact it could have on our economy. President Obama has made it a top agenda item.
In his recent State of the Union, he said he would ignore Congress and use “Executive Power” to raise base wages for some federal contractors’ employees. Good politics, but bad news for those working single moms he often touts as examples.
The first question concerned people should ask is “What will happen when that single mom’s employer is forced to make cuts to keep up with rising wages?”
And the second question should be: “Where will her children find their first jobs when they grow up?”
Answer to Question No. 1: Raising the cost of labor forces employers to use less of it. One only has to look at supermarket self-checkout lines to see that technology is steadily eliminating low-skill jobs.
Answer to Question No. 2: Creating jobs where future generations can one day learn the skills necessary to advance in the job market, build careers and stay ahead of technological change is the best benefit they could receive.
Artificially hiking wages ignores the key problem. It doesn’t help many who have jobs: 95 percent of hourly-paid employees already earn above the minimum and worse, it will increase unemployment and prevent businesses from hiring.
Those questioning NFIB’s opposition to government-mandated wage increases should ask themselves: “If I were a small-business owner facing labor costs that account for 70 percent to 80 percent of my operating expenses–costs that I’m unable to absorb–which option would I choose: Raise prices, lay off employees or close my business?”
Any of those options is a dead end for both small businesses and employees.Increasing the minimum wage will make things worse for families, for small-business owners and our economy overall.
It’s important to ask the right questions.
For more information on minimum wage and the impact on small business, visit: http://www.nfib.com/article/raising-the-federal-minimum-wage-240/