Business Owners Hit Hard by New Year’s Minimum Wage Increases
Some small companies have found they're 'going to have to make significant changes because' of these hikes, LifeZette learned in new interviews
Business owners from across the country were hit with dozens of minimum wage increases at the start of the 2019 — and some businesses already have been forced to close.
The Employment Policies Institute (EPI) released a report in the week leading up to the New Year that warned about the incoming wage hikes.
The conservative research nonprofit argued that such policies could have a severely negative impact on businesses.
In the short time since that report, a growing group of businesses have signaled their problems.
“We found probably over a dozen businesses so far who have already stated that they’re going to have to make significant changes because of these minimum wage hikes,” EPI communications director Samantha Summers told LifeZette this week.
“It seems widespread across the country, too. It’s not just in states with really high minimum wages.”
The EPI report found that there would be 42 separate minimum wage increases occurring around the country when it was released on December 14.
The minimum wage increases went into effect in 19 states and 23 localities between December 31 and January 1.
The report argued that the increases would be detrimental to the local businesses that are impacted.
“Businesses are saying they’re going to have to raise prices, reduce hours or reduce staff, and some businesses are speculating they might have to close, as the price of labor is making it difficult. And time will only tell as we get further into the year whether businesses are looking at their payrolls and checkbooks and saying, ‘We just can’t do this anymore.'”
New York Gov. Andrew Cuomo (D) ushered in one of the more aggressive statewide minimum wages at $15 an hour.
The state budget included a provision to implement the increase gradually over the years; it would hit $11.10 an hour on December 31. Businessman Marc Morley reported that he had to close multiple restaurants as a result.
The historic Durgin-Park Restaurant in Boston is also closing, as the state of Massachusetts increased its minimum wage to $12 an hour on January 1.
“We’re seeing articles with restaurants that have been around for many years, like the one in Boston, having to close. And it’s really sad,” said Summers.
Ohio is one such state that increased its minimum wage at the start of the year to $8.55 an hour. The Croghan Adult Care Facility announced it wouldn’t make it through the end of the month as a result.
The statewide minimum wage gets automatically increased at the start of the year, based on the consumer price index. Democratic lawmakers in the state have even been looking to raise the minimum wage to $15 an hour.
“With minimum wage increases comes inflation and price increases — and so the burger down the street that used to cost $7 now costs $8 or even $9 because of the minimum wage increases. There is extra money being added to the economy, but now the cost of goods is higher.”
The EPI study isn’t alone in its findings, as other groups have discovered that minimum wage increases could cause huge problems.
The Heritage Foundation and others have found that the increased cost of labor could reduce employment opportunities.
But there is still plenty of research that finds the negative impact is minimal or nonexistent compared to the benefits. The Economic Policy Institute found the benefits greatly outweigh the potential downsides.
The Barry-Lawrence Regional Library was impacted when a recent minimum wage was imposed in Missouri. But unlike a standard business, the organization was left with no options because it’s a nonprofit reliant on taxpayers.
Businesses have few options, too, but they can try to offset the losses through higher prices or reduced staff hours.
“We are mostly funded through property tax dollars,” Gina Milburn, director of the Barry-Lawrence Regional Library, told LifeZette. “So it’s a fixed amount every year. It doesn’t really go up and down. Unlike a business that can always charge $5 for a sandwich and maybe recoup some of the loss, we can’t really do that.”
The Barry-Lawrence Regional Library gets about 88 percent of its funding from tax dollars. It can only get more revenue following a budget revaluation. The group was talking about closing one of its lower performing branches when the minimum wage hike pushed it over the edge. The library system has 10 branch locations in total.
“We have a couple of branches that we’ve been looking at over the past two-to-four-year period that are not performing as well,” Milburn said. “This was the scenario the board has been discussing. We decided we weren’t going to do anything at the time because we’re [moving] along OK. But then the minimum wage happened. And that’s where the impact is.”
The Fight for $15 has been at the forefront of the minimum wage debate since it started in November 2012. The group has argued that minimum wages should be raised to $15 an hour and it’s had success in implementing the policy on the local level and in a couple of states.
The group didn’t respond when asked by LifeZette about struggling businesses.
The EPI has been warning about the potential negative impact of minimum wage increases for years. The group has released numerous studies and launched campaigns challenging the policy, especially when it comes to the progressive push for $15 an hour. The Faces of $15 campaign has highlighted small employers hit hard by such an increase.
The Fight for $15 and other supporters argue the policy is a great way to lift low-wage workers out of poverty. The increase could also spur economic growth, as more people are able to purchase things. Those opposed warn employers could be forced to reduce their staff or increase prices to overcome the added cost of labor.
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