While small business owners acknowledge that there are some downsides to increasing wages for their entry-level workers, many of these business owners also find positives in doing so, new research finds.
Nearly 60 percent of small business owners said they favor raising the minimum wage, and the same percentage said they would likely vote for a state or national candidate who supports a minimum-wage increase, according to a study from Manta, a provider of products, services and educational resources for small businesses.
The results were released as both California and New York recently approved measures to gradually increase their minimum wages to $15 per hour.
The majority of small businesses surveyed are already paying their employees above what's required. The research revealed that 40 percent of small business owners pay entry-level employees "far above" the required minimum wages in their areas of operation, while 38 percent pay "slightly above" the minimum wage. Just 14 percent are paying the state or local minimums, and only 9 percent are paying the federal minimum wage of $7.25 per hour. [See Related Story: 6 Proven Ways to Negotiate a Higher Salary]
"Many small business owners feel that paying above minimum wage is vital to staying competitive in their industry," John Swanciger, CEO of Manta, told Business News Daily. "From a talent-acquisition and employee-retention standpoint, providing attractive compensation packages can help owners hire qualified individuals who will ultimately help grow their business."
While nearly 30 percent of small business owners said a minimum-wage increase would have no impact on their operation, the requirement to pay employees more would require many businesses to make some changes.
Nearly 40 percent of those surveyed would have to charge more for their goods and services, 33 percent would need to reduce staffing levels, 27 percent would need to cut employee hours, 25 percent would be unable to expand their business or hire more employees, and 9 percent would need to cut their hours of operation.
Despite the negative effects, many small business owners still see the value of paying their employees more than the amount currently mandated.
"In tough markets especially, pay plays a large factor in recruitment and retention — so paying higher than the state or federal minimum is a huge plus, and one of the major pros of an increased minimum wage," Swanciger said.
Additionally, raising the minimum wage will put more money into the hands of low-income individuals who will then have more expendable income for things like food, gas and housing, according to Swanciger.
"This boost in demand will stimulate the economy and create even more opportunity for small businesses," he said.
Nonetheless, small business owners that are forced to raise wages will likely feel the pinch while they make the transition.
"This means some small business owners will hold off on hiring new employees while they figure out how to successfully navigate this shift," Swanciger said.
The study was based on surveys of 2,409 small business owners.