Many small business owners question why they should be opposed to the current proposal to increase the minimum wage by $3 to $11 an hour in Massachusetts. Some say they pay much more than the minimum wage. Some believe a “living wage” should be mandated so families can afford to live. If you don’t have lower wage, hourly, part-time or seasonal employees you may not understand the implications. Here are the reasons why you should be asking for a more moderate minimum wage increase, and why it should be coupled with other off-setting reductions in the costs of employing people in the Commonwealth, such as UI Reform.
Who is affected? Big union messaging would lead you to believe that minimum wage earners are struggling to support a family. In fact, there are 62,000 minimum wage workers out of 3.2 million employed in Massachusetts and only 17,000 are principal wage earners. The largest segment of minimum wage earners are teenagers, not heads of households. And, in part because of the minimum wage, teen employment in MA has dropped to 26.8% in 2012 vs. 53% in 1999. Other minimum wage workers include college students, retirees, and secondary wage earners working part-time to supplement the family income while perhaps raising children at home. Many minimum wage earners will keep their jobs and benefit from a higher minimum wage, but others will have fewer opportunities as the number of jobs decline. NFIB’s economic study concludes a minimum wage increase to $11.00 per hour indexed to inflation (as passed in the State Senate) will cause the state to lose not less than 50,000 jobs over the next decade depending on the rate of inflation. The state will forego more than $40 billion in economic activity even taking into account that minimum wage workers will likely spend the increased wages in the economy. These lost jobs are entry level jobs for young, minority, disabled, and inexperienced workers – just the people we are purporting to help with an increased minimum wage. (Bill Gates: If you make work more expensive than technology, jobs can suffer).
When wages increase and revenue does not, something has to give. Owners could increase prices, but consumers can go elsewhere for lower prices. Owners could reduce employment but customers can go elsewhere for better service. Other states in our region have raised their state minimum wage, but nowhere close to the MA $11 proposal. NY and CT will increase their minimum wages to $9 per hour in 2015. In addition, MA law requires some retailers to pay premium pay of time and a half on Sunday. Thus the minimum wage would be $16.50 on Sunday in MA and only $7.25 in New Hampshire.
Why Should You Care? Higher minimum wage means higher costs for consumers. In addition, taxes, health insurance premiums, and college tuition will increase as those industries will be greatly affected by a minimum wage increase. For example, low wage workers are prevalent in home health care and day care, hospitals, universities, and government, especially government contracts.
We have a long tradition of viable main streets across New England. With a higher minimum wage, small businesses will struggle to shift increased costs elsewhere while maintaining competitive prices with larger competitors. If we want small stores and restaurants on our Main Streets, we can’t price them out of existence.
We need to save teen summer and after school jobs as an important learning and social experience. Learning to arrive at a job on time, properly attired, work with others, receive a regular pay check, realize how much goes to taxes, and budget the remainder are important lessons. Thirty states have training wages for the first few months of employment.
Massachusetts employers have been seeking relief from some of the highest unemployment insurance taxes in the nation for more than two decades. UI taxes are high because MA is a high wage state AND because our benefits are generous – MA is the only state that funds 30 weeks of benefits, all other states offer 26 weeks of benefits or less – AND because our eligibility standards are easily satisfied – attachment to the workforce requirements are the shortest in the nation. While changes in UI will not come close to balancing the costs to small businesses associated with a higher minimum wage, real UI reform is important to the MA business climate and it will not happen unless it is tied to the minimum wage bill.
Where do we stand? NFIB opposes an increase in the minimum wage. We are also politically realistic. We want a minimum wage that is competitive with surrounding states. We oppose putting the minimum wage on autopilot by indexing it to inflation. We support relief for retailers from the anachronistic provision of automatic time and a half on Sunday. We support a training wage to help reduce teen unemployment. We support a tip credit that does not harm small restaurants. We support reform of our loophole filled unemployment insurance qualification standards to reduce the cost of creating a job.