During his State of the Union speech, President Obama called for a significant increase in the minimum wage – from $7.25 an hour to $9 an hour. While that might sound like a swell idea, the reality is that a minimum wage hike will undermine the ability of small businesses to compete with big business, put upward pressure on the prices of goods and services, and harm the very entry level employees Mr. Obama and others say they want to help.
Before Washington policymakers get too far down this road, they should stop and think about who we are talking about when we talk about minimum wage workers. They are often seasonal job holders, and part time employees – many of them students or low skill general laborers.
The current arrangement is win-win: The folks who work in these positions benefit from obtaining valuable entry-level work experience, they often enjoy flexible hours that enable them to earn money around a busy school schedule, or they get a chance to earn some quick money in a short-term job. For customers, it means more convenient service at a better price. For small businesses, it means being able to compete more effectively with larger retailers.
As usual, however, Mr. Obama and some people in Congress seem to be looking for a way to take a win-win situation, and create a loser.
Increasing the minimum wage now would be the second half of a one-two punch to the U.S. economy that started with last month’s across-the-board tax hikes. And it will be lethal combination for some small businesses.
Mr. Obama’s minimum wage mandate is a big-government full-court-press that will leave a lot of employers with just two options. The first would be to let one employee go to free up enough money to cover the required wage increase for another. That means the elimination of one job, and the possibility of lowering the quality of service as the employer has to assign add responsibility to the remaining employee’s workload. And that may in turn cost the business customers.
The second would be to raise the price of their product or service by as much as 25 percent – to cover the cost of the government’s decision to raise the minimum wage by that much. That means everyone pays more to cover the cost of this expensive government mandate.
With small business owners struggling to compete with big box stores and large corporations as it is, a minimum wage increase could truly be the difference between a small businesses staying in business, and closing its doors.
The bottom line is that a lot of small businesses can’t keep absorbing the costs of higher tax increases, new wage mandates, and rising compliance costs and continue to provide a competitively priced product or service out there for our customers. Frankly, when a lot of small businesses do the math, it just isn’t going to add up.
Many small business owners I know are already working on profit margins as thin as the piece of paper I am writing on. So how does president Obama think this is going to create jobs and make small business stronger?
Taxpayers are paying our elected officials in Washington handsome salaries to make policies that help the economy grow and create jobs. Stale ideas like raising taxes and raising the minimum wage aren’t it.
It’s time for Washington to start thinking outside of the box. After all, if an employer can’t afford to hire someone now at $7.25 an hour, how is he going to be able to hire someone at $9 an hour – after his taxes have been raised?
Todd Rodenburg is a native of Colorado, a graduate of Green Mountain High School, and the co-owner of Green Mountain Auto World, Green Mountain Xpress Lube, and Green Mountain Shell. His family has continuously operated a small business in Lakewood since 1974