Small Businesses Struggling With $15 Minimum Wage, New Site Reports

By Esha Chhabra of Forbes.

"Last week Senate Democrats introduced legislation to support a raise for minimum wage to $15 an hour by 2024. Nearly 20 states have already raised minimum wage at the local level.

While the Raise the Wage Act may have had positive intentions, it could close many small businesses, according to the Employment Policies Institute, a nonprofit which launched its own campaign last week called “Faces of $15,” a website that chronicles the stories of small business owners throughout the United States who are struggling to keep up with all the minimum wage increases.

The website contains 100 stories of small businesses that have been affected by the increased costs. “The real Faces of $15 are the business owners who've been forced to close their doors, and the employees who've lost their jobs,” says Michael Saltsman, managing director at EPI, "Policymakers shouldn't be fooled by labor's rose-colored rhetoric on a new wage mandate." 

According to the Small Business Administration, small businesses provide 55% of all jobs and 66% of all net new jobs since the 1970s in the United States. 28 million small businesses account for 54% of all US sales. In addition, 600,000 franchise small businesses in the US are responsible 8 million jobs. Add to that the real estate component: small businesses in America are responsible for occupying an estimated 20 to 30 billion square feet of commercial space.

The EPI argues that while it might be easy for corporations to adopt the $15 minimum wage, it's much more challenging for small businesses which form the backbone of the US economy.

Los Angeles, San Francisco and Seattle have already adopted minimum wage hikes. Los Angeles is geared to have $15 minimum wage by 2021.

Houman Salem of ARGYLEHaus of Apparel in San Fernando, California, a city within the limits of LA county, said that he will be going to Nevada for expansion because of the state’s minimum wage. He made the reason for this move public in an LA Times op-ed:

“The biggest reason is the minimum wage, which will rise to $15 by 2021 in the county and by 2022 statewide. I write with some hesitancy, because I’m in no way an opponent of higher pay. When you have a company with fewer than 50 employees, you get to know them pretty well and have a genuine concern for them as individuals. But that has to be balanced with concern for keeping your clients, who can always take their business to other countries or states.”

He then went to break down the economics of his company, which employs 25 individuals:

“When the $15 minimum wage is fully phased in, my company would be losing in excess of $200,000 a year (and far more if my workforce grows as anticipated). That may be a drop in the bucket for large corporations, but a small business cannot absorb such losses….Today, it’s cool to be a tech startup in Silicon Valley, but not to be an apparel industry startup in the San Fernando Valley. That needs to change.” 

He even challenged the president to get more familiar with the reality of running a manufacturing business in the US: “If President-elect Donald Trump is interested in learning more about the hurdles to adding manufacturing jobs in America, looking at the Golden State’s steep pay requirements would be a good place to start.”

That’s why the EPI has brought together stories of small businesses owners throughout the US onto one central platform to put a face to the economics of it all. Interestingly, one of the stories highlights a profit-sharing business that has ironically now closed because of the minimum wage hikes. Kelly Ulmer, owner of Almost Perfect Books in Roseville, California, had a business model that was employee-friendly, offering shares of all profits to the employees each week. 

“As the minimum wage increased, the profits decreased,” she says. “All of my employees actually made more money at $8 an hour than they do at $10 an hour because I had actual money to give them.”

In July 2016, she closed her store because of “the ever increasing minimum wage,” she says. She’s not alone. Nat Cutler, one of the owners of Abbot’s Cellar in San Francisco also had to close his doors when minimum wage went up -- along with other business costs in the city.

The stories are not limited to California, though they are concentrated in states that have already made moves to raise minimum wage. So it begs the question: is $15 minimum wage actually a good idea? 

According to Salem, “California’s putting up the going out of business sign. It’s a tragedy. ”"