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What about That Potential Minimum Wage Increase?


In his first State of the Union address this year, President Obama proposed raising the minimum wage from $7.25 to $9.00 per hour. There are many different theories about the economic impact of higher minimum wages. Some economists believe it will stimulate economic growth and lead to greater stability, while others think it may lead to more unemployment and less stability. Here are just a few pros and cons of a potential minimum wage increase:


  • Historically, raising the minimum wage has not led to greater unemployment.
  • Putting more money in workers' pockets may generate spending and strengthen the economy, which in the end could help small businesses prosper.
  • The minimum wage has fallen behind inflation. As Paul Krugman of the New York Times reported, "in real terms, the minimum wage is substantially lower than it was in the 1960s. Meanwhile, worker productivity has doubled."


  • An increase of the minimum wage may adversely affect businesses that are struggling with rising costs, higher taxes, and stagnant sales.
  • If small businesses can’t afford a hike in wages, they may offer fewer jobs, or close their doors, thus slowing economic growth.
  • Jim Calvin, president of the State Association of Convenience Stores in New York recently stated in Politics on the Hudson, "A lot of small businesses are treading water, unable to grow in current economic conditions. Without sales growth, you can't increase wages."

One thing is for sure. Small businesses will be affected by an increase in the minimum wage. To prepare for an increase in wage expenses, small business owners may want to look at the way they are doing business and the tools they're using. Here are a few basic tips:

  • Let technology help. If you have not looked at new technology or software recently, regardless of the type of business you run, there is no time like the present. Finding greater efficiencies through technology could cut operating expenses.
  • Consider using social media. Social media may help you grow your business and generate new sources of revenue. Sites like Facebook, Twitter, LinkedIn, Google +, and many others could help you find new customers. eBiz recently published a list of the top 15 social media sites. Can you name them?
  • Review your customer service policies. Is there room for improvement in the way you deal with customers? Making customers happy is good business and leads to referrals. Don't neglect your existing customers while trying to attract new ones. 


To see a history of federal minimum wage rates, visit the U.S. Department of Labor's Wage and Hour Division page. The federal government also has a Wage and Hour Division website where you can find guidelines about wages, family and medical leave, child labor, immigration, government contracts, and many other wage-related topics and resources.

Did you know?

Paychex can help you comply with many government rules and regulations. Contact us!

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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