IDAHO — A federal minimum wage increase from $7.25 to $15 an hour by 2025 is in the proposed pandemic relief package and has been a controversial topic for years.
“In something like this where you are trying to raise the standard of living for millions and millions of people, it gets juxtaposed against an increase in the cost of doing business, and something has to give," said Steve Miller, region director of the Idaho Small Business Development Center. “Quite honestly, there will be some businesses that won’t be well prepared to handle it and will go out of business.”
In 2019, a Congressional Budget Office Report estimated this increase would put 1.3 million Americans out of work.
“Because of this, you have businesses that can't afford to pay that higher wage, so it is going to mean fewer jobs for people,” said Miller. "And I don't mean to send people into a panic I am speaking factually."
Forcing many businesses to increase their prices to stay in business.
“Wage increase will be passed on in large part to the consumer to the goods and services that small businesses are selling.”
But, on the flip side, raising the minimum wage will bring many Americans out of poverty, something Idaho-native and CEO/Founder of Gravity Payments Dan Price advocates for after he increased all of his employee's pay to at least $70,000.
“When you raise the minimum wage, you reduce people's dependence on government and welfare because all of a sudden they don’t need those things,” said Price.
Which will also give people more money to spend, something he said will boost our economy.
“It creates that better economy with more consumers out there to support our local Idaho small businesses," said Price.
But the biggest impact he noticed after paying his employees more was their morale and happiness rose, increasing their work performance.
"We had a 10x spike in people buying homes for the first time, and having that financial security of homeownership, people's saving rates doubled and tripled, and 70 percent of the company announced that they were paying off debt. It was a wild success,” said Price.
He said that they also cut their employee turnover rate in half, a model that he believes will work for other small businesses in Idaho, but things do need to change.
“I know that some small business owners are so squeezed making payroll that next time I know what that is like being from Idaho growing up there, I was in that situation where I literally cannot pay more," said Price. "And that is where we need to have more structural reforms because right now the larger businesses have so many advantages, and they use it to nickel and dime the small businesses."
A structural reform that can start with where people are choosing to spend their money.
"What we really need to do is lift up and protect our small businesses, so we need our governor. We need everyone in Idaho to prioritize providing the small businesses the support they need so that they can afford to pay a better wage.”
Although the proposal, if passed, won't go into effect for a few years, Miller said that now is a good time for small businesses to start looking at their budgets and strategies.
"To really get to know their numbers, understand their profit margins and out of times like this comes innovation may be technological. It may be ways to get your workforce to work more efficiently," said Miller.