It seems like it’s been a while since the forecast of our economy was bright and sunny. The billowing clouds and growling thunder of recession and debt have threatened the security of our economy and stalled growth.
During the President’s 2013 State of the Union Address on February 12th, Obama suggested that the minimum wage be raised from the current $7.25, to $9 per hour. This proposal, along with many others of the evening, came out of a move to help stimulate the economy and bring minimum wage workers out of poverty.
But, not surprisingly, many disagree with President Obama’s solution, including those afraid of what effect it will have on small business.
Those against increasing minimum wage:
Almost as soon as Obama declared the need for a raise in the national minimum wage, opposition to the proposal began. Politicians on the other side of party lines, including House Speaker John Boehner, argue that increasing the minimum wage to $9/hour is a fatal mistake, claiming that businesses will be forced to let go of employees, or not hire at all, in order to pay for the wage hike.
Some business owners and corporation CEOs have confirmed the danger of increasing minimum wage, saying their company will not be able to support the increase and continue hiring.
“From our perspective, raising the minimum wage is a job killer,” said Dominos Pizza CEO, David Brandon, in an article by the Huffington Post.
Those for a minimum wage increase.
On the other side of the fence you’ve got those who support Obama’s proposal to increase wages, arguing that people working a full-time job at the current minimum wage are still unable to provide for their families, and they live below the poverty line.
Inflation is cited as the cause for the insufficiency of our current minimum wage. Although the cost of living has increased dramatically in the past decade, minimum wage has not been raised to match, which has spread the pocketbooks of workers too thin and requires them to seek government assistance.
From a financial perspective, supporters of the wage hike point to past minimum wage increases to reinforce their claim. Back in 1945, when minimum wages were increased from 40 to 64 cents, and then to 75 cents shortly after, the nation’s standards of living jumped drastically and the economy experienced a boom for the next three decades.
The reason is simple. When consumers earn more money, they do more spending, which feeds the economy and nurtures further growth.
“Americans are overdue for a raise,” writes Peter Drier of the Huffington Post.
What’s in store for the future of small business?
Just like meteorology, predicting the future of how raising minimum wage will influence small business growth is difficult, and not an exact science.
Perhaps, small business owners can weather the storm by hoping for the best, but preparing for the worst.
Read NPR and Bloomberg Business to see what economists and fellow business owners are saying about increasing minimum wage and its effect on the economy.
And don’t forget to check out our Knowledge Center to learn everything you need to know about incorporating a business.