Minimum Wage Proposals Another Punch at Small Business

Joel Fox
Editor of Fox & Hounds and President of the Small Business Action Committee

Minimum wage is back in the spotlight highlighted by  President  Barack Obama in the State of the Union address and a bill in the California legislature. For small business, the idea feels like another jab following the one-two punch from government with increases in health care mandates and taxes.

The president argued to raise the national minimum wage to $9 an hour from the current $7.25 an hour. Assembly member Luis Alejo’s (D-Watsonville) AB 10 proposes to increase California’s minimum wage a set amount each year from the current $8.00 requirement until 2017 at which time increases would automatically be tied to cost of living increases.

Supporters of the efforts argue that increases in the minimum wage would help families get out of poverty and improve the economy.

However, adding the minimum wage change to mandates that require health care cost increases for workers along with tax increases that will hit some small business owners who file their taxes through their personal income taxes is like adding another stone to an already heavy backpack small business must carry.

And, this doesn’t even take into consideration the potential energy cost increases that are predicted for businesses when California’s AB 32 requirements begin.

There is already speculation that businesses that employ about 50 employees, the magic number for health care mandates to kick in for small businesses, are considering not hiring or offering part-time employment. In the practical business world, the increase in the minimum wage at a time that the economy is barely recovering will force some business owners into further pragmatic decisions that could hurt the recovery.

California congressman, Kevin McCarthy, the House Majority Whip, said that the president’s proposal would strain small business, the job creator that could lead the country out of the weak economy. “I don’t think it’s going to (get votes) on either side of the aisle. It’ll take away from the economy,” McCarthy said.

One Washington-based think tank, the Employment Policies Institute, claims that a number of studies show increasing the minimum wage hurts job growth.

For small businesses the issue is practical in these times of rough economic seas and additional government mandates – how much can the business bear without killing jobs?

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