Going against the grain, some small business owners back wage hike

Barb Johnson, owner of Lyle's Cafe in Winthrop, supports raising the minimum wage.

Barbara Johnson, owner of Lyle’s Cafe in Winthrop, supports raising the minimum wage.

Think the minimum-wage hike progressing through the Legislature is bad news for Minnesota’s small businesses? Think again.

A survey released last week indicates strong support among small business owners nationwide for raising the federal minimum wage and adjusting it annually to account for inflation.

Small business owners gathered at the Minnesota Capitol yesterday explained the surprising survey results. Barbara Johnson, owner of Lyle’s Cafe in Winthrop, said when low-wage workers see more money in their paychecks, they are more likely to spend it at local businesses like her café.

“It’s just common sense in the restaurant business that if people have more money in their pockets, they’re more likely to go out for lunch on their break or maybe take their family out for dinner once and a while,” Johnson said.

She and other business owners spoke at a press conference staged by a coalition of unions, non-profit organizations and faith groups backing a House bill that would increase the state’s minimum wage to $9.50 over three years, and tie it to inflation. The bill’s author, Rep. Ryan Winkler (DFL-Golden Valley), said 400,000 Minnesota workers would see a raise if the measure becomes law.

By participating in the event, Johnson and other small business owners would appear to flout the company line toed by powerful trade groups and business lobbyists fighting hard against Winkler’s bill. These groups claim a minimum-wage increase would disproportionately affect small businesses by forcing them to reduce their payrolls in order to absorb the added labor costs.

There’s just one problem with that argument: It’s not backed by economic research.

In a study released last summer, the National Employment Law Project found that two-thirds of low-wage workers are employed not by small businesses, but by large corporations that are highly profitable – and entirely capable of absorbing increased labor costs.

Indeed, each of the nation’s three largest low-wage employers – Wal-Mart, Yum! Brands (parent of Pizza Hut, Kentucky Fried Chicken and Taco Bell) and McDonalds – is turning profits “substantially higher” than its pre-recession levels, according to the NELP. And while they may argue it would be impossible to absorb the cost of higher wages for their lowest-paid employees, CEO pay at the three corporations remains healthier than ever.

The report, entitled “Big Business, Corporate Profits and the Minimum Wage,” concludes: “Contrary to what critics sometimes suggest, the majority of the impact of any increase in the minimum wage will … be felt by large companies and corporations rather than small mom-and-pop establishments.”

What’s more, when large employers like Wal-Mart and McDonalds raise their workers’ wages, it boosts the buying power of a group of consumers least likely – or able – to save their wages for a rainy day. The Minnesota-based JOBS NOW Coalition reports that every $1 increase in the minimum wage boosts consumer spending in the average low-wage worker’s household by $2,800 over the following year.

That’s a ripple effect felt by businesses like Lyle’s Café. “If more people are spending more money, that’s great news for my bottom line,” Johnson said.

So why all the fuss from trade groups and chambers of commerce in advance of a minimum-wage hike?

“Employers complain a lot during these debates,” John Schmitt, a senior economist with the Center for Economic and Policy Research, said during a forum on minimum wage hosted earlier this year by JOBS NOW and the University of Minnesota’s Labor Education Service.

“They say one thing beforehand, and what they do after (a minimum wage increase) is they learn to live with it,” Schmitt said. “We don’t see any decrease in employment.”

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