Minimum Wage Bill Fails in Senate, Small Business Groups Respond

A Senate bill that would have raised the federal minimum wage from $7.25 to $10.10 failed in the Senate Wednesday. But President Obama and other supporters have vowed to make it an issue in the 2014 elections.

Small business leaders want elected officials to know they consider it an important issue too. The International Franchise Association, which supports franchise owners worldwide, thanked Senate leaders who opposed the bill yesterday.

In an official response to the Senate decision yesterday, International Franchise Association President & CEO Steve Caldeira explained:

“We commend the Senate’s decision to reject legislation to drastically raise the minimum wage, and thank the Senators who took a stand to protect our nation’s small business franchise owners. Congress’ own economists at the Congressional Budget Office have said that an increase in the minimum wage would reduce employment, and thankfully enough Senators heeded this dire warning in a sluggish and still fragile economy.”

While supporters of a minimum wage increase have tried to make the debate about a conflict between wealthy and working Americans, Caldeira made it clear most franchise owners are hardly flush. He said the difference between the current minimum wage and a higher rate would likely be the difference between survival and failure for some:

“For many franchise businesses that are labor-intensive and already operate on thin profit margins, this legislation could have pushed some operators out of business. Businesses should be able to determine the most competitive starting wage and subsequent raises for their employees within their industry and local economy.”

The National Federation of Independent Businesses promised to make the bill a “Key Vote” with its membership, suggesting the vote would be used by the NFIB when scoring legislators on small business issues.

In an official statement leading up to the vote, NFIB Manager of Legislative Affairs Ashley Fingarson had this to say about the legislation:

“Yet again, lawmakers are targeting the nation’s economic engine – small business owners – with an anti-employer agenda. With increases to health care costs, higher taxes, more costly regulations, and now a dramatic minimum wage increase, small business owners simply can’t afford another excessive government mandate. It could not be clearer from our studies and the recent Congressional Budget Office report – raising the minimum wage will kill jobs and stifle economic output.”

In one example raised by the NFIB, a pizza parlor selling 100 pies for 360 days a year at $10 makes $360,000 a year.

If the business has 10 minimum wage employees at $7 per hour working 2,000 hours a year, then labor costs would be about $140,000. Add to this food costs, depreciation, insurance, supplies, licenses, rent, utilities and equipment for another $170,000.

Profits are now $50,000 annually, certainly far from the income of a “wealthy” person. Now raise the minimum wage by just $1, not the amount advocates want it to increase, and profits from our franchise owner are now just $30,000 a year.

The owner can try to raise prices, of course. But this may decrease the demand for the product, and perhaps result in layoffs.

Capitol Photo via Shutterstock

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Source: Small Business Trends

Minimum Wage Bill Fails in Senate, Small Business Groups Respond