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August 01, 2007
Survey: Small Businesses Expect to Feel Burden of New Minimum Wage

Nearly 70 percent of small businesses say that they might have to raise their prices because of costs associated with the new federal minimum wage, according to a survey by the U.S. Chamber of Commerce.

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The survey also found that more than 20 percent of small employers said they expect to scale back plans to add staff because of costs associated with the new minimum wage. About one-third of respondents said they have experienced other, non-wage related cost increases as a result of the revised minimum wage.

The federal minimum wage increased from $5.15 per hour to $5.85 per hour on July 24, the first of three increases that will occur over the next two years. In general, employers in most states weren't directly affected by the change because their state minimum wage is already higher than the new federal rate.

Employers in more states will be affected when the final two steps of the federal increase occur. The minimum wage will increase to:

  • $6.55 per hour on July 24, 2008
  • $7.25 per hour on July 24, 2009

"Mandating that small companies pay minimum wage workers at a rate higher than what these companies can afford, is bad business," says Marc Freedman, the Chamber's director of labor policy. "This survey confirms that the raise drives up costs for everyone and that fewer jobs for low wage earners will be created. Even this modest increase will hurt free enterprise, and the increases which will go into effect in 2008 and 2009 are likely to have an even greater negative impact."

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