Minimum Wage Issues

by Russell Huebsch
Minimum wage and its effect on jobs is a century-old debate.


dispute for the money image by ktsdesign from

Almost all businesses must pay their workers a minimum wage set by the federal Fair Labor Standards Act, or a higher state minimum wage, according to the Department of Labor. Even if the FLSA does not cover a business explicitly, state law similar to the FLSA might demand workers receive a minimum salary. On the political side, small businesses sometimes feel minimum wage disproportionately affects them more than large companies.


Since the idea of a minimum wage developed during the 1890's, industry often criticizes minimum wage law as putting an undue burden on business and reducing the number of jobs available to workers, according to "Time" magazine. In addition, until the 1930's, the Supreme Court frequently voted against state minimum wage law as infringing on a person's right to negotiate his own wages and contracts.


Small businesses often argue that because they tend to have smaller profit margins than large companies, they are more adversely affected by increases in minimum wage. In reality, minimum wage increases have a small impact on small businesses as 91 percent of small business employees earn more than minimum wage, according to CNN.


Raises in minimum wage still can reduce retail and small business employment for certain demographics, such as youths and low-income families, even if most employees earn more than minimum wage. The Employment Policies Institute found that teen employment in the retail sector dropped 2.7 to 4.3 percent for every 10 percent increase in minimum wage. Small businesses reduced youth employment by 4.6 to 9.0 for every rise in minimum wage of 10 percent.

Living Wage

The living wage movement is a push to create a minimum wage that meets the needs of a family--such as shelter, food and health--not just a certain number. Instituting a living wage would adversely affect small business as large businesses can afford to pay a living wage, but would also demand better workers--drawing skilled workers away from small business, according to Carl Gipson, Director of the Center for Small Business at the Washington Policy Center.


Small business owners sometimes have trouble ascertaining which minimum wage laws apply to their company, according to the Texas Workforce Commission. The Fair Labor Standards Act, for example, exempts businesses that do less than $500,000 in business per year. The FLSA, however, contains a provision that allows it to apply to any interstate business. A small business that sells primarily to out-of-state customers, for example, could be covered by the FLSA even if it does less than $500,000 in sales each year.

About the Author


Photo Credits

  • dispute for the money image by ktsdesign from
bibliography-icon icon for annotation tool Cite this Article