A topic that has grabbed a lot of headlines in the past year or so is whether the government – at either the local, state, or federal level – should mandate an increase in the minimum wage to better provide low-income workers with a livable salary. Not surprisingly, there is a bit of dissent among small business owners specifically about whether this would be good or bad for their companies’ bottom lines overall.
The reasons entrepreneurs typically find themselves on either side of the issue are simple, according to a report from the Los Angeles Times. On the one hand, having higher wages overall might serve to make small businesses more competitive with larger competitors in terms of attracting and retaining top talent in their fields, and many experts often cite statistics which show that higher wages lead to a more robust economy overall.
“Corporate America is already paying good, hefty wages,” Maria Contreras-Sweet, head of the U.S. Small Business Administration, told the newspaper. “So what we want to do is also make sure small businesses are able to attract a talented, skilled workforce. And to do that, they need to pay a substantial salary.”
A potential downside
On the other side of the issue, though, is the fact that many small business owners say they simply can’t afford to pay their workers an extra $2 or $3 per hour, because of how much that adds up over the course of the year, the report said. Some business analysts say that these costs can actually be counteracted by raising prices very, very slightly, because even a full-time employee getting paid $3 more per hour only adds up to an additional $120 per week. But there is also the concern about alienating current customers or clients with those high prices, and driving them away.
Some are even concerned that higher wages could lead them to have to lay off some workers, the report said. Some studies, however, show that this isn’t really the case; higher pay actually makes current employees work harder, perhaps because they feel better about their positions with the company.
Owners will, of course, have to weigh their own financial situations when making staffing and wage decisions, but they might be able to help themselves out by finding a little wiggle room in their bottom lines. For instance, trying to find more affordable small business insurance – including policies for errors and omissions insurance – could end up saving them thousands annually.