Many small businesses across the country are seeing their finances improve considerably these days, but at the same time it’s important to note that they often still continue to operate on extremely thin margins. As such, a number of experts now say that the coming increase in the national minimum wage might cause problems for some companies.
While an increase from the current federal minimum wage of $7.25 per hour to President Barack Obama’s planned $10.10 may not seem like a lot in theory, but for companies with even a few employees making less than the minimum wage, it can significantly increase their payroll costs and put them in a much more precarious financial situation, according to a report from the New York Times. One small business owner noted that her 16 employees getting such an increase in pay will end up costing her company between $10,000 and $15,000 more per year, and that these salaries already take up 80 percent of the enterprise’s expenses annually.
Already, 13 states across the country have raised their minimum wages this year, and 22 more – in addition to the federal government – could begin to consider such moves this year, the report said. It should be noted, though, that many of these changes are taking effect simply because legislators are trying to make the minimum wage catch up with inflation or increases to the cost of living that has taken place since the last time it was increased, and Obama’s plan would be to tie future increases to annual inflation.
Some disagreement still lingers
The fact of the matter is that many experts consider $7.25 per hour to be less than a living wage, and in fact that level – when adjusted for inflation – is about 23 percent lower than the minimum wage’s value in 1968, the report said. However, others note that given the ways in which many small businesses are only just recovering from the financial crisis might leave them vulnerable if such increases go into effect soon.
Owners looking to shore up their company finances may be able to do so quickly and easily by simply shopping around for small business insurance policies. Doing so, and finding reduced costs for coverage like liability insurance, for instance, may help companies to save thousands of dollars annually, which can then be used to deal with other aspects of the company’s growth.