“We would have to reduce staff and close our smallest location,” says one small business owner.
The U.S. House of Representatives is preparing to send their plan to increase the federal minimum wage to $15.00 per hour by 2025 to the U.S. Senate, likely during the week of February 22. Originally introduced as the Raise the Wage Act of 2021, the minimum wage hike is expected to be part of the $1.9 trillion American Rescue Plan COVID-19 relief package moving through Congress this month.
NFIB and small business owners are urging Congress to reject this substantial wage increase mandate, as it would be a huge blow to Main Street jobs and the small business economy.
To help stop the minimum wage law’s passage, NFIB is leading a group of 30 other major business associations such as the American Farm Bureau Federation and the National Restaurant Association who together issued an open letter to Congressional leadership.
“When small employers are confronted with increased labor costs, they are left with few options, all undesirable. They can increase the price of their product or service or reduce spending. Often, this means that employers reduce their total labor force, keep open positions unfilled, and reduce employees’ hours,” the letter reads.
Kevin Kuhlman, NFIB’s Vice President of Federal Government Relations, also issued a letter to the leadership of the U.S. House Committee on Education and Labor urging against the problematic wage increase mandate. The increase would imperil the recovery of America’s small businesses following the COVID-19 pandemic.
“Small businesses are far less likely than larger businesses to have cash reserves or profit margins to absorb the increase in labor costs,” Kuhlman wrote. “At a time when small businesses are confronted with the worst pandemic in more than 100 years, Congress should not saddle them with a costly new mandate that will further damage the fragile economic recovery.”
NFIB research paints a stark picture of the effects of the policy: 1.6 million jobs will be lost, 57% of which at small businesses. Those with 100 or fewer employees will be hardest hit of all, accounting for 43% of all job losses. There will also be staggering $2 trillion reduction in real economic output. 92% of NFIB members oppose the increase.
The bill’s proponents have not publicly acknowledged these criticisms. As part of a statement accompanying the Raise the Wage Act of 2021, Chairman of the House Committee on Education and Labor Bobby Scott (D-VA) said that “bigger paychecks for working families not only help them make ends meet, it also increases consumer demand and grows our economy. No one working full-time should live in poverty, and we cannot build a strong economy on the backs of impoverished workers. America deserves a raise.”
In truth, the bill would do the most harm to small business jobs, and most benefit large corporations that can more easily adapt to a sudden spike in the cost of labor.
Just ask Gianni from New York, whose bakery went out of business after 37 years due to New York’s minimum wage increases. “I needed to make up for these increases and the only way to do it was to shift it to the consumer. How much is someone willing to pay for a loaf of bread or a pound of cookies?” He asked.
His customers were turned away by the higher prices and instead went to large supermarkets for their baked goods. “The big companies benefited greatly from this. They got more customers and replaced half of their minimum wage staff with kiosks and half time employees,” Gianni said.
“Small businesses employ nearly half of the private sector workforce and are responsible for half of our GDP,” added NFIB’s Kevin Kuhlman. “Big business may be fine with a dramatic increase of the federal minimum wage as they’ve been thriving during the pandemic, but small businesses know these policies will make it even harder for them to compete and survive.”
Take Action: Please let Congress know how a $15 per hour federal minimum wage would impact your business, your employees, and your community. Make your voice heard on Capitol Hill with our action alert, telling Congress that Small Businesses Cannot Afford A $15 Per Hour Minimum Wage.