Federal $15 Minimum Wage Boost Would Have Huge Harmful Impact on Small Businesses: Entrepreneur, Expert

March 22, 2021 Updated: March 22, 2021

A Nebraska small business owner and an expert with the Heritage Foundation, a conservative think tank, told NTD News’ “The Nation Speaks” in a recent interview that a $15 federal minimum wage would have a major impact on many of the country’s small businesses, including forcing them to cut hours, replace human labor with automation, hitting them with a range of hidden costs, and pushing some into bankruptcy.

Entrepreneur Kevin Barnhill, who owns Blair Meat Market in Blair, Nebraska, said that the federal minimum wage hike now being pushed in Washington would have an “enormous” impact on the bottom line and operations of his business—and likely many others.

It “shifts the whole scale and creates just an enormous impact on small business,” Barnhill said, noting that because of a spread that’s maintained between skilled and unskilled labor, it would impose a hidden cost by forcing him to boost the wages of his skilled employees, further squeezing his bottom line.

“First I would eliminate those types of jobs,” he said, referring to unskilled labor that he now hires part-time at $12 an hour. Then, “I would force or coerce my current, full-time staff to pick up some of that—and then we would look hard to automation.”

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Sen. Bernie Sanders (I-Vt.) speaks during an event to introduce the Raise The Wage Act in the Rayburn Room at the U.S. Capitol in Washington on Jan. 16, 2019. (Chip Somodevilla/Getty Images)

Rachel Greszler, a research fellow in economics, budget, and entitlements at the Heritage Foundation, told “The Nation Speaks” that regional differences in labor supply and demand means that in some states, a $15 minimum wage would have an outsized impact on business costs.

“Fifteen dollars in Mississippi would be like having a nearly $36 minimum wage in Washington DC,” she said. “A lot of state and local governments have already increased their own minimum wages and that’s really what makes sense here, because America is very diverse,” she added, arguing for a localized approach based on differing regional circumstances, rather than a federally-driven, one-size-fits-all approach.

Greszler added that her research on the impact of a federal minimum wage boost shows that business owners’ “options are limited—go to automation, reduce those jobs, and cut off the jobs that are available for lower skilled workers.”

She said companies reducing the availability of lower-wage unskilled labor positions would harm younger people who rely on these types of jobs to get their foot in the door of the labor market and use them as a springboard to better-paying positions.

“Some companies are really going to have to go out of business because of this,” she added.

The Congressional Budget Office has estimated that a federal $15 minimum wage mandate would lift 900,000 people out of poverty but also result in the loss of 1.4 million jobs nationwide by 2025.

Barnhill said that, while this trade-off would help some people, it would be a net loss.

“They may think they’re raising people out of poverty, but the offset is not going to work out,” he argued.

He said that he already offers a 3-dollar premium on Nebraska’s $9 dollar minimum wage to attract unskilled workers, and that a $15 federal mandate will mean that his floor will then be raised to $17 or $18. “And that’s where it forces me to enter that proportionate shift on my higher end paid guys also.”

Following a failed attempt to include a minimum wage hike in President Joe Biden’s American Rescue Plan, House Speaker Nancy Pelosi (D-Calif.) said on March 11 that Democrats would continue to fight for raising the federal minimum wage to $15 an hour.

“We will persist with the minimum wage,” Pelosi told reporters during a press conference.

“A low, substandard minimum wage is corporate welfare. It’s subsidizing the private sector not to reward work,” she said. “The taxpayer is subsidizing the low minimum wage for the private sector” through programs such as Medicaid, food assistance, and housing assistance, she added.

The last time the federal government raised the minimum wage was in 2009, boosting it to $7.25 per hour. The percentage of people who are paid $7.25 an hour or less is 2.1 percent of all hourly workers, the Bureau of Labor Statistics reported in 2019 (pdf), with the vast majority earning a higher wage.

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House Speaker Nancy Pelosi (D-Calif.) speaks during a press conference in Washington on Feb. 11, 2021. (Olivier Douliery/AFP via Getty Images)

Economists have for years hotly debated the issue of raising the minimum wage, with advocates arguing that raising salaries will boost purchasing power and the added spending will lift the economy, while opponents argue it will hurt businesses and lead to higher unemployment.

While numerous studies have been done over the years in support of both positions, a new working paper from the National Bureau of Economic Research, a nonprofit research organization, reviewed the entire set of published papers that look at the impact of minimum wage hikes on employment in the United States since 1992. In the paper, economists David Neumark and Peter Shirley conclude that the overwhelming majority of papers (79.3 percent) found that minimum wage hikes had a negative impact on employment.

They also found that the negative impact is stronger for less‐​educated workers, teenagers, and young adults, and is particularly strong for workers who are directly affected by minimum wage hikes—that is, workers whose wage rates increase automatically as a result of the policies.

Economic arguments for raising the minimum wage as a way to boost spending and lift economic output have also been challenged, with Ryan Bourne of the Cato Institute, a libertarian think tank, concluding that this argument “ignores contractionary impacts from lower profits reducing investment, higher prices reducing other spending, or reduced employment opportunities cutting some people’s incomes.”

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