Minimum Wage Increase: The Effects on Small Businesses

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President Obama has approved a plan to increase the Federal minimum wage to $10.10 an hour by 2016. There are those that believe raising the minimum wage will benefit low wage earners and boost their families over the federal poverty line. However, others believe that it will negatively affect the same group of people it is proposed to help. Many believe unemployment will increase due to less job opportunities and employees being let go, and businesses will be put in danger. Small businesses will be in more danger than large business will be. Majority of small company’s pay their workers the minimum wage, while employees at large businesses are paid by salary. Due to the increase in the federal minimum wage, small businesses will receive less profit for their company, will have to lower their employee count and teenagers will have a decreased opportunity to get an entry level job. With an increase in minimum wage, businesses are going to see a decrease in their profits. According to the Center for American Progress, “calculations show that prices would have to rise modestly and profits would have to fall in order to accommodate President Obama’s minimum wage proposal.” It is common sense that since the pay rate for employees is going to increase, than the business will be spending an increased amount of money on labor costs. In addition, businesses are going to need to increase the prices of the items they are selling. It is a known fact in economics that when prices rise, people buy less of the product or service (Sherk). If people buy less products from a business, than the business will have a decreased amount of sales. The company won’t be making enough money through selling products to have a large amount of pr... ... middle of paper ... ...he working field. Small businesses need to have employee positions available so more teenagers can experience working at an entry-level job before a higher level. Works Cited Dunkelberg, Bill. "CBO Finds Federal Minimum Wage Increase Could Cost 500,000 Jobs." National Federation of Independent Business. N.p., 15 Jan. 2014. Web. 26 Mar. 2014. "Entry Level Job." N.p., 2014. Web. 30 Mar. 2014. Sherk, James. "What Is Minimum Wage: Its History and Effects on the Economy." The Heritage Foundation. N.p., 25 June 2013. Web. 30 Mar. 2014. Walker, Scott. "Minimum Wage Jobs Are 'Overwhelmingly' For Young People." PolitiFact Wisconsin. N.p., 13 Jan. 2014. Web. 30 Mar. 2014. Weller, Christian. "A Higher Minimum Wage Will Hurt U.S. Businesses." Center For American Progress. N.p., 15 Feb. 2013. Web. 29 Mar. 2014.
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