For many small businesses around the country, January 1 marks more than the new year—the minimum wage will be rising in 21 states for 2015. (For example, Massachusetts will see its hourly base wage rise from $8 to $9 on January 1, while Arkansas’s will rise from $6.50 to $7.25.)
Some small-business owners already pay more than minimum wage in order to compete for talent and therefore will be minimally affected by the hikes (though they may have to raise their wage to keep their competitive advantage). But certain types of small businesses that hire many minimum-wage employees, particularly restaurants, will be hardest hit.
Judy Herrell, owner of Herrell’s Ice Cream in Northampton, Massachusetts, says she agrees that raising the minimum wage in her state was the right thing to do. However, the hike—which will eventually increase Massachusetts’ base wage to $11 an hour by 2017—will take a toll on her business. Raising the minimum wage, she says, increases other employee-related costs beyond just worker pay. “There’s taxes involved in that, there’s unemployment, everything will go up with it,” she told New England Public Radio. “It’s a very high increase to our bottom line.”
Some restaurants have been so affected by local minimum wage increases that they’ve taken dramatic steps, such as charging customers a “minimum wage surcharge,” revamping their menus or even docking their wait staff’s tip income—all with public backlash.
Some states have taken steps, however, to protect very small businesses, such as exempting businesses with less than $500,000 in revenue or those with fewer than 10 employees. Some states also still allow restaurants to pay a lower minimum wage to their tipped wait staffs, even though that lower wage may be rising, too.
Tina Abbott, co-owner of Cup ‘N’ Cork, a coffeehouse and café in Cape Girardeau, Missouri, said she doesn’t expect Missouri’s 2015 minimum wage hike will dramatically affect her business. Her small staff gets tips, meaning she can pay them the state's lower minimum wage for tipped workers. (Her minimum wage is rising only 9 cents, from $3.74 to $3.83 an hour.)
But when it comes to the future, Abbott says, the state’s ongoing increase of the base wage will take a toll on her business, because it’s adjusted every year for cost-of-living increases. “They keep doing this to us every year—15 cents here, 15 cents there,” Abbott told the Southeast Missourian. “Every time you do that, we have to compensate somewhere.”
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