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Minimum Wage Hike Good for Business Bottom Line

By John Arensmeyer  Posted by Holly Sklar (about the submitter)       (Page 1 of 1 pages)   No comments
Message Holly Sklar
The sky is not going to fall.

On July 24, the federal minimum wage increased for the first time in ten years, moving up 70 cents from $5.15 an hour to $5.85. It will take two more years before the final step in the raise to $7.25 takes place in 2009.

You'd think this might cause dire economic consequences, if you were to listen to big lobby organizations like the National Restaurant Association. They oppose any increases in the minimum wage -- never mind that it is actually lower in real dollars than that of the 1950's. They say it is harmful to business and a "jobs killer." Nothing could be further from the truth.

A raise for those at the bottom won't hurt the bottom line. Business can make a profit without keeping workers in poverty.

A survey of small business owners across the United States conducted by my organization, Small Business Majority, in 2006 showed that 62% of America's entrepreneurs support an increase in the minimum wage. Most entrepreneurs recognize that a stable, healthy and productive workforce is essential to our prosperity in the 21st Century.

I joined with hundreds of business owners and executives endorsing a statement calling for a higher minimum wage sponsored by Business for a Fair Minimum Wage My fellow signatories include Costco CEO Jim Sinegal, U.S. Women's Chamber of Commerce CEO Margot Dorfman, apparel industry leader Eileen Fisher, Addus HealthCare COO Mark Heaney, Small Business California president Scott Hauge, and small business owners from every state.

As the statement says, "Businesses and communities will benefit as low-wage workers spend their much-needed pay raises at businesses in the neighborhoods where they live and work. Higher wages benefit business by increasing consumer purchasing power, reducing costly employee turnover, raising productivity, and improving product quality, customer satisfaction and company reputation... A fair minimum wage shows we value both work and responsible businesses. A fair minimum wage is a sound investment in the future of our communities and our nation."

Indeed, states that have already raised their minimum wages above the stagnant $5.15 level have had healthier economies than the other states. Studies by the Fiscal Policy Institute and others show that the number of small businesses and the number of small business employees grew more in states with minimum wages above the federal minimum than in other states -- contrary to what critics predicted. Likewise, after the last federal minimum wage increases in 1996 and 1997, the nation experienced lower unemployment, lower inflation, robust growth and declining poverty rates.

Business leaders in Washington State who predicted economic disaster when the minimum wage was raised nearly a decade ago, now admit that they have "prospered far beyond their expectations," the New York Times reported. On the Washington-Idaho border, the economy was thriving in Washington where the minimum wage is almost $8 per hour, while stagnant in Idaho where the minimum wage was $5.15.

The federal minimum wage has been so eroded over time that even when it goes up beginning July 24, workers will have less buying power than minimum wage workers had half a century ago. After rising to $7.25 in 2009, the minimum wage will still be lower than it was in 1956, when it was $7.65, adjusting for inflation.

We cannot build a prosperous 21st century economy on a falling wage floor.

Most business leaders recognize that we need to focus our energies in building a strong, competitive 21st Century economy that creates the jobs of the future. A minimum wage that reinforces a decent minimum standard of living is a necessary component of progress.

It is time that traditional business organizations stop claiming to represent the interests of America's entrepreneurs by offering nothing more than shopworn, ideologically driven "chicken little" proclamations.

John Arensmeyer is Founder and CEO of Small Business Majority, a national small business advocacy organization. He can be reached at
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Holly Sklar is a widely published op-ed columnist whose books include "Raise the Floor: Wages and Policies That Work for All of Us" and "Streets of Hope: The Fall and Rise of an Urban Neighborhood," the widely taught story of how the Dudley Street Neighborhood Initiative is rebuilding a long impoverished Boston community.
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