Thinking Ahead About Minimum Wage Increases

Minimum wage increases are phasing in around the country, and small businesses may hurt long term as a result.

“Small and independent retailers and restaurants are likely to feel the biggest impact of rising minimums because they employ many low-wage hourly workers,” The Associated Press reports. “Nearly three-quarters of U.S. workers paid at or below the federal minimum wage of $7.25 an hour work in retailing or the leisure and hospitality industries.”

Business owners who are planning ahead are thinking through options for bearing the cost of the payroll increases, looking at increasing their prices, cutting costs and staff restructuring to eliminate jobs.

The expenses related to raising the hourly wages of the lowest-paid employees include pressure to increase pay for workers who have a longer history with their companies, as well as boosts in the costs of workers’ compensation insurance, Social Security and Medicare, the AP says.

In California and New York, the state minimum wage will be upped to $15 an hour over the course of multiple years.

“State minimum wages have been rising the past few years as pro-labor groups, including unions, call for higher pay for workers, especially those at fast-food restaurants,” according to the AP article. “That’s forcing small businesses that are more vulnerable to labor cost increases than large companies to reassess their operations.”