The debate over a proposed increase to the federal minimum wage continues.
Proponents say that boosting workers' minimum hourly rate to $10.10 will lift some 4.6 million people out of poverty in the United States. But opponents disagree, arguing that the wage hike will hurt the economy, causing employers to cut jobs and hours, and to raise prices to absorb the new costs of doing business. Or, they maintain that revisiting policy tools—the Earned Income Tax Credit is an oft-cited candidate—is a better alternative to raising minimum hourly pay.
But what are small and medium-sized business owners saying?
In a Manta/CNN survey conducted in January 2014 of more than 1,200 business owners, 49 percent say they are not in favor of raising the minimum wage to $10.10 per hour. Forty-four percent of the respondents were in favor of the increase, and 7 percent say they're still unsure.
Beyond that, it gets more complicated.
Realities of Pay in 2014
One way to understand the nature of employee pay is to talk to the people who cut the checks, such as Charles Read, CEO at Custom Payroll Associates, a Texas-based service that handles the take-home pay of workers at thousands of companies.
"In reality, an increase to $10.10 minimum wage won’t mean much to most of our clients," Read says. "Less than 14 percent of the employees make less than $10 an hour now. Many pay several times that."
Read's observation corresponds to what many of the survey respondents suggest: When it comes to wages, an increased minimum wage doesn't look like a massive change.
- 55 percent of the small and medium-sized business owners already pay $10.10 or more per hour.
- 20 percent say the hourly wage at their company is $7.26 to $10.09.
- 7 percent say they pay the state or federal minimum wage.
Slightly more than a third of the owners answered other, however, instead of a number or pay range. In that, there could be reticence to disclose wage information, or it could be that they represent businesses that pay different minimum rates for tipped employees.
"Most of those under minimum wage are tipped employees and make, in total, a great deal more than minimum," Read says. And, he adds, "Many of the employees at minimum wage make commissions on top, as much as 100 percent and more."
But for those who are paid much less than the $10-per-hour range without those perks, Read says he sees the effects at the employer's level. "The turnover at those companies is horrendous."
What a $10.10 World Looks Like
Should President Obama's wage increase proposal become a reality, opponents forecast job loss and price increases. But, asked how their businesses would change in response to a hike, the surveyed owners plotted several courses. (They were invited to check more than one response, so the percentages below exceed 100 percent.)
- 48 percent say they would make no changes to their business.
- 32 percent say they would raise prices.
- 26 percent indicated they'd cut their number of employees or cut employee hours.
- 18 percent would cut back on business expenses other than employee hours or hiring.
- 18 percent say they'd react in some other way.
Meanwhile, nearly three-quarters of the respondents say a living wage in their city or state should be more than the current minimum.
- 11 percent say it should be $9.01 to $10.09.
- 21 percent would set a living wage at $10.10 to $13.
- 21 percent put it at $13.01 to $15 per hour.
- 20 percent say a living wage in their area is more than $15 per hour.
Still, with 22 percent pegging the living wage at $7.26 to $9, there's room for disagreement about exactly what kind of payroll makes sense to business owners in some regions.
Whichever way the debate goes, what business owners have to say about the outcome departs from the political discussion in a crucial, but perhaps not surprising way. Their opinions are more nuanced and reflective of day-to-day ownership. Whereas political rhetoric tends to suggest sweeping change, the picture business owners paint is primarily one of adjustment and fine-tuning.
Read more articles on small-business finances.
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