A possible minimum wage hike may mean bad news for smallbusiness, especially for minority entrepreneurs. The U.S.Senate may vote to raise the federal minimum wage up to $7 by2006.
Sen. Edward M. Kennedy (D-Mass.), who viewsthe increase as a way to alleviate the discrimination women andminorities face in wage distribution, sponsors the proposal.
The wage increase will be gradual, startingwith a 70 cents increase within the first two months of the bill’spassage, then another increase by 60 cents by 2005.
Although the measure to raise the federalminimum wage seems like a great idea, many business owners see thebill as a potential problem.
The U.S. Chamber of Commerce and the NationalFederation of
Independent Business Owners oppose thelegislation, arguing that it will cause an increase in the cost ofdoing business and ultimately affect the consumer. Businessessuch as restaurants are most likely to be drastically affected by awage hike.
Many businesses, particularly thosespecializing in food services, tend to hire the young and theinexperienced. These are entry-level positions where peopleare trained to develop job skills. By raising minimum wage,it becomes more difficult for businesses to have larger staffs tomake up for the inexperience of those who are being trained.
While a corporation like McDonalds may not begreatly affected. Local Mom n’ Pop shops may not surviveanother strike against a small independent business. TheEmployment Policies Institute reported that in 1996 over half amillion people in entry-level positions lost jobs due to a 50-centwage hike.
Despite these possibilities, Sen. Kennedy doesnot believe that
past wage hikes have hurt small businesses asbadly as some may
think. According to the AssociatedPress, Jim Manley, press secretary of Sen. Kennedy stated, “Historyshows that raising the minimum wage has not had any negative effecton jobs, employment, or inflation.” He goes on to say that 11million new jobs were added after the last minimum wageincrease.