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STRATEGY

Minimum Wage Hike Reignites Debate

Opponents say small employers are already struggling with weaker sales and rising costs.
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Amid the sluggish economy and a weaker labor market, this week's federal minimum wage hike is expected to reignite debate over the impact of mandated wage levels on small employer costs, small-business experts say.

On Thursday, the national minimum wage will rise from $5.85 per hour to $6.55, the second phase of a gradual increase that began last year with the passage of the Fair Minimum Wage Act. A third increase next year will set the minimum wage at $7.25.

Opponents of the hike say boosting the cost of low-skilled workers will put a stranglehold on smaller employers, especially in tough economic times.

"A hike in the minimum wage increases the cost of labor, and when you do that, employers purchase less of it," said Michael Elmendorf, the New York State director for the National Federation of Independent Business, a Washington-based lobby group.

"What happens is we'll lose employment opportunities. It doesn't make a lot of sense," he said.

Small-businesses owners are already struggling with rising energy prices, weaker sales and tighter credit conditions, Elmendorf said.

A survey of 311 small employers last year by SurePayroll, a Chicago-based small-business payroll firm, found over 90 percent paid workers more than the federal minimum wage. Most states have already set the minimum wage above the federal level.

"There won't be any major impact with the increase," SurePayroll President Michael Alter said. He added that a higher minimum wage might even help small-business owners, since more workers with extra cash in their pockets will boost consumer spending.

"Most people who are making minimum wage deserve a raise anyway," Alter said.

There are currently an estimated 13 million minimum-wage earners across the nation. Before last year's increase, the federal minimum wage had not changed in over a decade.

Last updated: Jul 23, 2008




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