During his recent State of the Union address, President Barack Obama said he wouldn’t wait for Congress to approve an increase in the federal minimum wage and would instead sign an executive order to push it through himself. As a consequence, a potentially large percentage of the nation’s small business owners may now be more worried about the ways in which this change will end up affecting their bottom lines.
Under Obama’s executive order, the minimum wage will rise to $10.10 per hour, up from the current $7.25, and while that may not seem like much, it could serve to significantly and further thin the margins on which many small businesses already operate, according to a report from the Associated Press. While 30 states nationwide have introduced bills that would boost the minimum wage within their own borders in the last year alone, only four have already signed off on such changes.
What’s the difference?
However, the question remains how much smaller companies will be affected by this alteration to federal law, the report said. Recently, a number of polls of small business owners showed that many actually support increasing the minimum wage, despite fears of what it might do to their companies’ bottom lines, the report said. However, approximately 3.6 million people across the country make the minimum wage or less, but of those just 4.7 percent – only about 169,000 – are paid by the hour, and there’s no indication of how many of those people work for small businesses specifically.
“We’ve pretty much cut our expenses to the max,” Steve Holand, owner of Carry Cases Plus in Paterson, N.J., who has 31 employees including 12 paid at the state’s minimum wage, told the news agency. There’s nowhere else to cut except to cut employees or raise prices. If we end up doing this (paying workers more), it puts us at a competitive disadvantage. If we raise our prices, we hope people will pay the higher costs. If they go elsewhere, we’ll end up laying people off.
Many owners may have to find new ways to reduce their expenditures as much as they can, and perhaps by considering new ways to do so. That might include finding more affordable small business insurance policies, such as liability insurance, while still having coverage that fits their companies’ needs. Doing so might be able to help them slash their annual costs, and in turn devote that money where it’s more needed.