There have been articles written espousing the need for New York to raise the minimum wage and supporting the NYS Assembly Speaker, Shelly Silver's plan to do so. As more and more support for the proposal comes to light, my colleagues in Albany and I are bracing for the blowback from business.
Each and every time that the federal -- or any state for that matter -- minimum wage has been raised, it was done against a firestorm of opposition from Chambers of Commerce around the country and the U.S. Chamber of Commerce. Yet there is absolutely no evidence to indicate that raising the minimum wage hurts businesses in the long term. So, fellow small business owner, I ask you -- hold your fire. Yes, an increase in the minimum wage means you will incur higher expenses for paying your employee's wages. However, employee retention, productivity and benefits to the economy as a whole because of increased buying power make an increase in the minimum wage worthy of your support.
According to some estimates, many minimum wage employees will leave employment for a 5 or 10 cent per hour increase in pay while higher minimum wages may decrease employee turnover. The cost to replace a departing worker averages one third of that employee's annual salary.
Employee morale and productivity are also, of course, affected by wages. A worker who is unable to make ends meet is less likely to put in his or her best efforts. As a business owner, you probably want to pay more to keep your workers satisfied but fear that if you do, your prices will have to be higher than your competition's. A minimum wage increase solves that problem since your competitor will have to raise salaries as well.
Economic realities dictate a raise in the minimum wage but we also can't ignore the moral arguments. It is simply, the right thing to do. At today's wages, the low wage worker is the working poor. Had the minimum wage in New York kept up with inflation, it would currently be $10.80 per hour. At the current proposed increased rate, a family of three will still be below the federal poverty level. As a society, we need to make a statement that says the American Dream is real and it is attainable. If you work hard, you will succeed. The message now? If you work hard at two or three jobs you might be able to survive.
Putting money into the hands of low wage workers has a stimulative effect and benefits the economy as a whole. There are hidden costs of low wages. Low wage workers and their families have incomes that must be subsidized by the state in the form of food stamps, welfare and rental assistance. Those costs may be reduced while local spending may be increased. Think of the single mother with two kids that is making $290 per week (before taxes) and pays rent of $900 per month on a two bedroom apartment. If you put money into the hands of that parent, is there any doubt that she will spend it? Studies show that she will and that the spending and increased purchasing power creates jobs. In fact, the Fiscal Policy Institute predicts that this current increase in NY will create 7500 jobs.
The facts are clear, small business owner. Please do not let political scare tactics influence your opinion on this issue. The last time the federal minimum wage was raised, a coalition of businesses which included the U.S. Women's Chamber of Commerce and numerous small business coalitions did, in fact, support the increase. I am hopeful that we will see that type of support occur again.
Editor's Note: This post has been updated since its original publication.