Minimum wage increases have taken effect in 19 states and many more cities across the country. These sweeping increases, while appearing beneficial on the surface, carry unintended consequences, and the data is clear—small businesses suffer.

“It turns out that after a minimum wage increase, the number of businesses in an affected geography immediately starts to drop. Now, this might not be terrible news if the reduction was driven by a slight acceleration in the closure of older, underperforming companies. But existing businesses are fine. In fact, corporations—generally the largest, most entrenched companies—gain size and market share,” said Hansen.

While corporations benefit, entrepreneurs are more hesitant to enter the market, stifling new businesses from forming and eroding the small business economy. Without the formation of new businesses, consumers have less diversity of businesses to patronize, and corporations gain a bigger piece of the pie.

In an opinion piece published in RealClearMarkets, NFIB Director of Research and Policy Analysis, Peter Hansen, explores the harsh realities of widespread minimum wage increases and delivers insight on its effects on small business.