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SMBs: Minimum Wage is not Living Wage, Split on Pay Increases

Small business owners across the U.S. are divided on raising the minimum wage, according to a recent survey from online small business lender OnDeck, and SCORE, a network of business mentors.

The top line results show that 43% of small business owners support a minimum wage increase, while 39% do not, despite the finding that 73% believe that the minimum wage in their state is not a “living wage.” The current federal minimum wage is $7.25 per hour and has not increased since July 2009. Twenty-nine states and the District of Columbia and nearly all cities have a minimum wage higher than the federal bottom line. Greater than 90% of American minimum wage workers earn more than the federal minimum with the median at $11.80/hour.

Quick side trip for context: A few statistical reasons why the minimum wage issue is important to managed service providers (MSPs) and other channel partners:

  • Small to medium-sized businesses (SMBs) are the backbone of the channel. Overall, there are more than 30 million small businesses, or firms with less than 500 employees and less than $7 million in annual revenue, in the U.S., or about 99.9% of all businesses, according to the Small Business Administration’s Office of Advocacy.
  • SMBs employ nearly 60 million people, or about 48% of the country’s total employee workforce.
  • There are 4.2 million professional, scientific and technical services firms in the U.S., the second largest number of small businesses. MSPs are part of that vertical segment.

Back to the survey:

Small business owners are split on their state’s minimum wage.

  • 44%: the minimum wage is too low.
  • 40%: it is about right.
  • 16%: it is too high.

A majority of small business owners believe a minimum wage increase would significantly impact their business.

  • 55%: higher minimum wage would hurt their business.
  • 16%: minimum wage increase would positively affect their business.
  • 44%: increased minimum wage would result in cutbacks to investments in their business.
  • 33% would not have to cut back as a result of an increased minimum wage.
  • 37%: would raise other employee wages proportionately; 34% would not; 30% unsure.

A majority of small business owners agree the minimum wage is not a living wage.

  • 73% of business owners do not believe the minimum wage is a living wage.
  • 11% believe it is a living wage.

“This data shows that the majority of small businesses have a very small staff, and that a majority (58%) already pay their staff more than the minimum wage,” said SCORE CEO Bridget Weston. “For the majority of small business owners, the question is not whether the minimum wage is appropriate at a state level; rather, it’s how they will respond to an increase, whether that means adjusting other employees’ wages proportionately, or investing differently in their business.”

Survey results were based on data provided by 897 small business owners who responded via email in November 2019.

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