07/23/2008
CONTACT: Melissa Sharp, 202-314-2068
Bad timing according to small business expert
WASHINGTON, D.C. -- Statement from William C. Dunkelberg, chief economist for the National Federation of Independent Business, the nation's leading small business organization, on this week's federal minimum wage increase:
"With inflation pressures increasing for small business owners, this is not the best time to be forcing employers to pay workers higher wages. Every dollar a minimum wage worker gains must come out of either the income of the business owner (so they have less to spend on their business) or out of the pockets of customers who will have to pay higher prices (e.g. inflation) and will have less money to spend on other goods and services.
"Raising the minimum wage forces employers to pay more for the same amount of work. This raises unit labor costs for whatever the firm is producing. With labor costs accounting for 70 -80 percent of business costs, the impact can be substantial, especially for small businesses. In order to maintain skill and experience differentials between workers, when the bottom wage is increased, businesses are required to adjust the entire wage structure at their business. This raises labor costs by more than just the initial increase that employers must pay due to the mandated minimum wage increase.
"To add insult to injury, unemployment is rising. Jobs are getting more difficult to find, particularly for the young and unskilled. Increases in the minimum wage most often affect those young and unskilled potential employees. So, the increased minimum wage makes it more difficult to hire those who are most adversely affected by the economic slowdown.
"Due to the weak economy, the Fed is trying to fight inflation and job loss at the same time. Raising the minimum wage makes both tasks more difficult. Business owners will now have to find a way to deal with rising food prices, energy costs and labor costs simultaneously. Firms will try to pass on some of these costs in the form of higher prices for consumers, which won't help inflation concerns. And, other firms will reduce opportunities for unskilled workers to get a job. Neither scenario is good for small business owners or the general economy."
