Across country, businesses expect negative effects from higher minimum wages

As large cities across the US from Seattle to Los Angeles to New York City implement or consider $15 per hour minimum wages, business owners are sounding alarms about the consequences.

In a piece picked up by USA Today, the Lower Hudson Valley (NY) Journal News reported that with New York expected to approve a $15 minimum wage for fast-food workers “any day now,” business owners “fear Gov. Andrew Cuomo’s push for the higher wage for one segment of the economy will force wages up across the board.” Restaurant owners like Anthony Ripani, who owns a small restaurant in Orangeburg, NY, are particularly concerned because even if their businesses are too small to be regulated under Gov. Cuomo’s proposed $15 per hour wage plan, in order to keep current staff from leaving to go to better-paying jobs, these business owners will be forced to increase wages.

In an op-ed for the Wall Street Journal, Andy Puzder, CEO of CKE Restaurants, a chain based in California, noted the recent wave of sharp increases in the minimum wage in some localities, and says that while it is too early to get a firm feel for the impact, early data suggests that it is resulting in job losses in places such as Seattle. Overall, Puzder said that the increase will be good for those who can get and retain a job, but quite bad for many others.

Similarly, in an op-ed in the Miami Herald Carlos Gazitua, CEO of US Cuban restaurant franchise Sergio’s, discussed some of the reasons the proposed $15 per hour minimum wage is harmful to businesses. He argued that employers that pay minimum wage are typically in the service industry sector and have “ultra-competitive businesses with high labor costs and razor-thin profit margins.” In a competitive environment where prices for consumers can’t rise, Gazitua warned the only solution is for these companies to reduce costs by cutting “employee hours, jobs and expansion plans.” He noted that his business is headquartered in Florida, and now that they plan to expand nationwide, “a $15 local minimum wage may inspire us to find another location.”

What This Means For Small Businesses

The examples above come from the restaurant sector, but small business owners across sectors are likely to suffer even more from rising labor costs, which will force owners to move operations to places with lower wages, or else cut jobs and worker hours. The rising push towards minimum wages is a top threat to US small businesses.

Additional Reading

NFIB has previously noted the negative consequences of higher wages in Seattle as well as San Francisco.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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