Raising the federal minimum wage to at least $15 an hour will lift millions of Americans out of working poverty – and it’s scaring a lot of special interests who profit from keeping people poor. In this series, we’re dismantling the myths, one by one, that Raise the Wage opponents use to try and stop 40 million workers from making the money they deserve.
This week, we’re tackling the minimum wage’s effect on jobs & businesses.
It’s the most overused, outdated, and glaringly false argument against the Raise the Wage Act out there, and it’s also the one its opponents love to use the most.
“Raising the wage will be bad for business! It will cost American jobs! Small business owners will be crushed!”
Each and every one of these statements is laughably wrong. And as successful business owners and investors ourselves, we would know. So let’s get several things straight and break this down fully.
Raising the wage will be bad for business: If you stop to actually think about this statement for more than even the briefest of seconds, it defies basic economic theory. For a business to sell anything, it requires a consumer to sell to, and the consumer has to have money to pay for their goods and services in exchange. Business growth in the United States is based entirely off of that consumer demand, and if consumers are struggling to afford even basic necessities, then they have no disposable income to grow that demand. Naturally, then, if you raise the wage for 40 million workers, you unlock a market of 40 million people – how could this be anything but good for business?
Since raising the wage floor for those 40 million workers will have ripple effects for the payscale of millions more working Americans, we have to understand the Raise the Wage Act for precisely what it is: a massive economic stimulus where it’s needed most. Right now, a mind-blowing 40% of Americans don’t have $400 on hand in case of an emergency, forcing them to constantly toe the line between fiscal disaster and security. If the Raise the Wage Act goes into law and creates critically-needed wage growth for all of those workers, that’s nearly 130 million Americans spread out across the US that will suddenly have more disposable income to boost the full range of local, state, and national economies.
This isn’t just pure theory. In states that have raised the minimum wage over the national level, small business and retail job growth has surged above states that stick to the federal floor because there is an increased demand in the communities that need it. This is just a no-brainer.
Raising the wage will cost jobs: This argument claims that when the federal government raises the minimum wage, business owners experience a sudden new shock in expenses and have to cut hours or entire jobs just to break even. The evidence shows, however, raising the minimum wage has historically had little to no effect on employment. As far as the Raise the Wage Act goes, the nonpartisan Congressional Budget Office reported this year that the bill would boost the pay of 17 million workers, sparking substantial new economic growth, and conceded that most economists agree that it would have little to no effect on employment. The report does predict that it could result in a little over a million job losses by 2025, but it fails to account for the job creation stimulated by higher consumer growth and demand that lifting over 40 million workers out of working poverty would undoubtedly provide, completely ignoring one of the most important economic benefits of this bill.
Raising the wage will hurt small business owners: Often times, this line gets trotted out by GOP politicians and pundits to try and conjure up a frightful image of mom-and-pop storefronts on Main Street closing down because they won’t be able to afford their operating expenses when the minimum wage goes up. Though they claim to speak on behalf of these working people, opponents of raising the minimum wage really just use them as a last-resort shield when the previous two shoddy arguments fall flat.
We’re generally of the opinion that small business owners know what’s best for small business owners, and according to poll after poll of them, they are behind higher wages for their workers! In fact, a whopping 67 percent of small business owners supported raising the wage to $15 an hour, and a similar majority expressed the belief that raising the wage will have “no impact” or a “positive impact” on their businesses.
At the end of the day the need for a higher minimum wage boils down to the same point: a few greedy businesses and investors in this country are turning a profit off of keeping millions of Americans at poverty-level wages. Not only can we afford a higher federal minimum wage, we, all of us, workers and businesses alike, desperately need a higher federal minimum wage. So the next time you hear a Raise the Wage opponent mouthing off about how businesses can’t afford a minimum wage, consider perhaps that it’s just their own individual business model that can’t afford to treat people like human beings. Trust us – the economy will be just fine.
