President Barack Obama announced Tuesday his hope that Congress will gradually increase the federal minimum wage from $7.25 to $9 in 2015. The possibility has Abilene small business owners worried.
In his State of the Union address, Obama said a full-time minimum wage earner makes $14,500 a year. If the federal minimum wage is increased to $9, those earners would see approximately $3,000 more in their paycheck.
Dianne Green, owner of McKay’s Bakery, said she already pays some of her hourly-wage employees more than $7.25 an hour, but none earn $9 an hour. Green said she employs 18-22 workers between two locations and the thought of raising the federal minimum wage is unsettling.
“We have no alternative but to pass that raise increase on to the consumer and if your profit margin is at 7-to-10 percent and your labor goes up 8 percent, then you've got to pass that on somewhere for you to make any money,” Green said.
Judy Wilhelm, director of the Texas Tech Small Business Development Center in Abilene, said Green is not the only small business owner who fears the potential minimum wage increase.
“Anytime you have an increase, whether your vendors increase, you know their supply does or whatever, you're going to have these things impacting their bottom line and any business owner is going to be looking to see what they can do to start compensating for that,” Wilhelm said.
Green said she is already thinking about how her business would be forced to compensate.
“The fact is, you know, we have some tough decisions to make,” Green said. “Do you employ fewer people? Do we shut down a location? You know, where can we make some cost savings in order to pass that along?”
On the flip side Wilhelm said higher pay would help small businesses invest in employees who would likely stimulate the economy by buying the necessities they could not afford before.
The federal minimum wage has been $7.25 since July 24, 2009 as a result of the Fair Labor Standards Act.
According to the U.S. Department of Labor, 22 states currently have a state minimum wage equal to the federal minimum wage. Washington D.C., along with 19 states, have minimum wages higher than the federal minimum wage. Washington State has the highest state minimum wage at $9.19 an hour.