Minimum Wage: Will an Increase Affect Your Growth?

Raising the minimum wage has, once again, become a popular solution to a tepid economy and to what some economists see as a shrinking middle class. Some politicians are suggesting a minimum wage increase from its current $7.25 an hour to $10.10. That's even more than President Obama's $9.00 proposal, but significantly less that the $15.00 minimum wage recently passed by SeaTac, the small town by Seattle's airport.

Some economists believe that raising the minimum wage hurts young and low-skilled workers by pricing them out of a job, but the move has public support. A recent Rasmussen poll found that 78 percent of respondents favor raising the minimum wage to $10.10 an hour or more. And states have embraced the movement. Beginning in 2014, 21 states plus the District of Columbia will have a minimum wage higher than the federal $7.25, according to the National Conference of State Legislatures.

minimum wage

Minimum wage legislation tends to disproportionately affect middle market companies because the legislation often exempts smaller companies. For example, the SeaTac law exempts small businesses and restaurants with fewer than 10 employees.

These efforts come at a difficult time for middle market companies. After a few years of upbeat confidence about revenue growth, the latest Middle Market Indicator survey saw expected revenue growth over the next 12 months has declined to 4.4 percent. A dynamic, growing economy can make up for some costly public policy decisions, but we have not seen a vibrant economy for several years.

What can middle market CEOs do to mitigate the damage? Some will try to remain under the threshold that triggers the minimum wage - just as some will do for health insurance - but that's not a prescription for company growth. Others may try and shift to contract labor. And still others may look to relocate to states and cities that are less aggressive on wage mandates, but moving is costly and can break long-held community ties.

For CEOs who want to fight increase proposals, one of the best options are personal testimonials. CEOs can talk about the financial challenges they face trying to run a business, make payroll and provide a good place to work. Remember that many state and local elected officials who might vote for the increase have never owned a business and don't know what it's like to meet a payroll.

No one can educate them better than CEOs who have to do so regularly. CEOs can also encourage employees who are concerned about job disruptions and layoffs to provide their own testimonials. In the YouTube age, anyone can create a video and make it available for all to see.

Finally, middle market CEOs should join together for a broad-based public education campaign to discuss issues surrounding wage increases. Even if the current minimum wage increase proposals don't affect your company, it sets a bad precedent. A government that feels justified in raising the minimum wage high enough to hurt some companies may soon feel justified in raising it high enough to affect your company.

Merrill Matthews is an NCMM contributor and a resident scholar at the Institute for Policy Innovation in Dallas, Texas. Follow him at http://twitter.com/MerrillMatthews and circle him on Google+.