Mo' Money, Mo' Problems?

The third and final phase of the three-tiered minimum wage hike passed by Congress two years ago took effect on July 24. Workers who had been making $6.55 an hour now earn $7.25 -- a whole 70 cents more.

Despite knowing about the increases for two years, owners of many small business say they're worried the extra $28 some employees get each week will cause them to go bankrupt. Diana Ransom at The Wall Street Journal weighed the pros and cons of the minimum wage increase. The biggest pro was that because low-wage earners earn so little, they will most likely spend it, giving small businesses a small boost in sales. The biggest con, of course, was higher labor costs. (In our unscientific OH&S poll, only one person said the increase would cause his or her company to cut its training budget.)

We've heard these pros and cons whenever a minimum wage increase is hotly debated. I have a few questions of my own, ones the OH&S community might be able to answer:

Are owners really going to shutter their businesses because they have to pay their cashiers $56 more per paycheck? I know small businesses run on narrower profit margins, but if a 70-cent increase in someone's wages is going to bankrupt a business, wouldn't it have eventually gone bankrupt anyway?

More than half of the minimum-wage population is younger than 23, and more than half of that population is in school. Will they save or spend those extra $56? Would spending it boost small business sales enough?

And, considering that only 31 will be affected, what's happened in the 29 states that already have a minimum wage higher than the federal one? Have their increases affected small businesses so much that there are blocks and blocks of shuttered, dilapidated buildings?

Posted by Carla Saavedra on Aug 05, 2009


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