Proposals to increase the federal minimum wage continue to come before Congress, and continue to generate intense controversy. Two years ago, when the Fair Minimum Wage Act of 2004 was introduced in the U.S. House of Representatives, Randel K. Johnson of the U.S. Chamber of Commerce said of the bill, "It is [small] businesses, the backbone of our economy, which will be hurt the most by this proposal." And during a push for an increase in the minimum wage in 2002, the National Federation of Independent Business stated: "Given the precarious state of the economy, a minimum wage hike would be the worst thing that could happen for small-business owners." Both times, the efforts to increase the federal minimum wage went up in flames, and a similar bill was rejected by Congress this year.
QUOTE: Most businesses in America are already paying more than the minimum wage -- they have to, to attract workers.
In light of this strong opposition, one would think that $2.10 -- the amount that this year's bill would have hiked the federal minimum wage -- would horrify small-business owners. As it turns out, they really don't seem to care that much. In March, the Wells Fargo/Gallup Small Business Index survey asked small-business owners about the minimum wage. A significant percentage, 86%, said the minimum wage has no effect on their businesses. Few of them (14%) would be more likely to hire a new employee for $5.15 an hour, which is what the minimum wage has been since 1997, than to hire that person at a higher wage (80%). Forty-six percent even said the minimum wage should be increased. (See "Minimum Wage Has No Impact on Small Business" in the "See Also" area on this page.)
The vehement opponents of the minimum wage, such as those quoted above, usually say the first victims of a minimum wage hike are small-business owners. Small-business owners, Gallup's research shows, might well disagree. A wage hike would nevertheless have some effect on the economy. The question is, how much?
Meanwhile, millions of Americans are struggling to get by on less than $10,000 a year before taxes. What would an extra $2.10 an hour mean to them?
These are likely to remain hotly debated questions, particularly as Democrats seek to gain control of the House or Senate this fall -- and Dennis Jacobe, Ph.D., Gallup's chief economist, has given them a lot of thought. In this Q&A, he assesses the potential impact of a minimum wage hike on the economy and explores other pressing political issues, such as illegal immigration and job offshoring, whether there really is such a thing as a "living wage," and a little-exploited advantage small-business owners have over the big guys.
