Raising the Minimum Wage: The Small-Business Killer

Kathrynne Hester, Staff Writer

The federal minimum wage being raised to $15 per hour would be beneficial for a lot of Americans. This is what so-called progressive politicians want America to believe. In reality, a $15 minimum wage would kill small businesses by reducing the work hours employers can afford and cause a lot of employees to lose their jobs. If employers have to decrease work hours, this can cause employees to lose their benefits. The contrast between Texas and California illustrates perfectly the negative impact of a raised minimum wage.

Money pays for housing, food, transportation, education, and many other important things, so it’s understandable that some people are calling for a raise. However, it is very important to recognize that while it seems like a great idea now, raising the federal minimum wage to $15 an hour would be disastrous to our economy and livelihood. 

Representative Alexandria Ocasio-Cortez bartends at a New York City restaurant in support of a campaign to raise the federal minimum wage. Photo courtesy of slate.com.

House member Alexandria Ocasio-Cortez (D-NY), stated that “everyone deserves…the ability to raise [their] family,” and that is true. Everyone does deserve that. However, raising the minimum wage will have the exact opposite of the effect intended.

Initially, the Covid-19 relief plan that the U.S. House of Representatives recently passed contained a $15 federal minimum wage increase. However, the minimum wage increase was holding up the bill because it was too contentious and was therefore removed. Our own government decided that the federal minimum wage raise shouldn’t be included in the relief plan. So why are people rooting for it?

Small businesses are privately owned enterprises that employ 100 or fewer workers. These small businesses need to employ people to get the job done. This means that the employer needs to have enough money to pay their employees AT LEAST the federal minimum wage. With the employee’s paycheck, state and federal taxes, the cost of supplies, workers insurance, and many more costs, finding and keeping good workers is hard enough, but if the federal minimum wage goes up to $15 an hour, most employers will be unable to employ all the workers they have now.

The current federal minimum wage is $7.25 per hour. If the federal minimum wage were raised to even $10 per hour (still a full $5 less than the sought after $15), it would cost us 500,000 jobs, according to a 2014 Congressional Budget Office study. In a study conducted by the Harvard Business School, for each $1 increase in minimum wage there is a 4 to 10 percent increase in the likelihood of restaurants closing; about 900,000 restaurants are small businesses. Smaller restaurants are already reeling from Covid-19; an increased minimum wage could prove their death knell.

According to the California Department of Industrial Relations, California’s current minimum wage is $13 to $14 an hour, and by 2023, it will be up to $15. In contrast, Texas has stuck with the federal minimum wage of $7.25 per hour. In the past ten years, 15,000 businesses have left California. Energy costs in California are 50 percent higher than the national average, and small businesses make up to 98 percent of all the businesses in California. 

At first, paying a high minimum wage makes employers and employees feel good, but eventually businesses have to let some people go because they can only afford so many workers and hours. If a business is really struggling to pay their workers, they may have to raise their prices and risk losing customers. Raising the minimum wage is a loss for everyone. Business owners lose because they don’t gain any profit and have to cut workers, and customers may be less satisfied. Employees lose because they have less hours available and some lose their jobs altogether.

Allowing the free-market forces of capitalism to reign and upholding legal employment are the best ways to create and keep a healthy economy and encourage the American people to remain industrious. Capitalism allows producers to set their own prices and consumers to choose what they want to buy and from whom they wish to buy it.

Results from a poll where 115 Woodson students were asked if they supported a $15 minimum wage. Infographic by Naomi Scully-Bristol.

Doubling the minimum wage forces employers to find efficient and innovative ways to replace minimum wage workers.  For example, half of the people in a grocery store use self-checkout aisles monitored by one employee. Those self-checkout lanes used to employ a minimum-wage worker at every cash register.

Businesses and jobs will be lost if the federal minimum wage is raised to $15 an hour. The only people who will benefit from increasing the federal minimum wage will be the politicians and the lucky employees who get to keep their jobs. The important question that every working American needs to ask themselves right now is if they want more jobs for the many, or less jobs and more money for the few?