9 Reasons Why Raising the Minimum Wage is Good for Business

“Raising the minimum wage would be bad for the economy, and it would hurt small businesses.”

I hear it all the time. I’ll be on a panel, or a call, or speaking at an event on workforce development, and any time the raising the minimum wage comes up, someone says it.

As the CEO and founder of a small business with less than 50 employees, I care about how policies affect small businesses. I’m dedicated to voicing to lawmakers about investing in the growth and prosperity of small businesses and workers. As a startup founder, I know raising the minimum wage is good for business.

You don’t have to take it from me, though. Research has proven there’s one factor that’s most important when it comes to maintaining healthy businesses: making sure customers have enough money to buy what you’re selling. David Cooper, a Senior Economic Analyst at the Economic Policy Institute, stated in a recent report that: “the number one problem for businesses right now isn’t excessive labor costs, it’s a lack of demand.”

This is true in general, but in the wake of the COVID-induced recession, it’s especially true. Over the past year, we’ve seen skyrocketing unemployment, underemployment, and families across the country are struggling financially at rates not seen since the Great Depression. In fact, the Brookings Institution estimates that the average American won’t have the buying power they did in 2019 until 2023. Meaning, it will take four years for a regular consumer to regain the financial stability they had before the pandemic.

Bottom line? Yes, raising the minimum wage will result in an increased labor cost. No one’s denying that. However, raising the minimum wage will also lead to increased demand, higher worker productivity, and reduced employee turnover; benefits that far outweigh the costs of a higher minimum wage.

How does raising the minimum wage benefit businesses?

Here are nine benefits of raising the minimum wage that show why it is good for business.:

1. Every additional dollar earned by a low-wage worker adds $1.21 to the economy: Paying low-wage employees more means that millions of workers will have disposable income to make ends meet, which increases consumer spending power.
2. It would save U.S. taxpayers more than $150 billion per year: Each year in America, taxpayers pay about $152.8 billion toward government assistance programs for low-wage workers (such as SNAP, formerly known as food stamps; Medicaid; and other federal assistance programs). If employers paid their workers living wages and benefits, these government assistance programs would need significantly less funding and could eventually become obsolete. In fact, raising the minimum wage to just $12 per hour would cause SNAP spending to fall to $5.3 billion each year — thereby saving taxpayers more than 7% in annual SNAP spending. Over a decade, that equates to more than $52.7 billion in taxpayer savings on SNAP alone.
3. Raising the minimum wage to $15 by 2025 would add $107 billion in higher wages for full-time workers: That means more than $100 billion would be added to the economy that can be spent supporting businesses. Plus, since low-wage workers have the least amount of disposable income compared with other groups, the vast majority of that money would go directly back into the economy toward daily necessities.
4. It would decrease racial inequity in the workforce: In America, nearly one-third of all Black workers and one-quarter of all Latino workers would receive a raise if the minimum wage was $15. So a $15 minimum wage would decrease the skyrocketing income inequality in the U.S. and lead to greater overall economic growth.
5. Low-wage workers who received a $1-per-hour pay increase spent an additional $2,800 in the year after: As the Center for American Progress explained it, “minimum wage increases will go right back into local economies, helping workers and businesses get through the pandemic and economic crisis.”
6. Raising the minimum wage does not cause employers to employ fewer people: A broad consensus of academic research spanning the past 30 years have debunked the common argument that raising the minimum wage leads to higher unemployment, even in sectors that currently have the lowest wages.
7. Raising the minimum wage is one of the most unifying issues in America today: Across the political spectrum, 72% of Americans support raising the minimum wage as of August 2020 — a significant increase from before the pandemic in February 2020, when 66% of Americans surveyed said they supported an increase.
8. It would help close the gender pay gap: In states with a minimum wage of $10 or more, the gender pay gap is 34% smaller than it is in states with a $7.25 minimum wage, according to new research from the National Women’s Law Center. Plus, 64% of women in America are the sole or primary breadwinner in their household — meaning women account for most consumer spending in the economy. Since nearly 59% of workers who are paid the federal minimum wage are women, increasing the minimum wage would have a fast and significant impact on increasing consumer spending power. Closing this gap would also be a critical step toward reducing pay gaps for women of color, who disproportionately work in low-wage jobs.
9. If the minimum wage automatically adjusted to reflect productivity increases throughout the past 80 years, it would currently be more than $20 an hour: If the minimum wage was raised incrementally to $15 by 2025, the income of more than 32 million workers would increase. This drives home our biggest point: even if you don’t care about the wellbeing of low-wage workers — even if you only value your company’s bottom line — then you should still support raising the minimum wage. Put simply, phasing in this kind of increase will boost economic growth and consumer spending for millions of workers as we continue to recover from the economic and health crisis spurred by COVID-19.

We want to hear from you: Are you a worker or business leader who supports (or opposes) raising the minimum wage? Tell us why. 

Email your thoughts on how an increase in the minimum wage would affect you, your workplace, or the economy to devin@1huddle.co and your quote could be featured in an upcoming blog as part of 1Huddle’s minimum wage series.