Minimum Wage Increase: Much Ado About Nothing for Most Small Business Owners According to SurePayroll Survey

February 21, 2007; 02:12 AM

Small business owners are not losing much sleep about an increase in the national minimum wage, according to a recent survey by national payroll service provider SurePayroll.

According to the SurePayroll survey, the majority of small businesses (51 percent) don't even know what the minimum wage is in their state.

Of the small business owners surveyed by SurePayroll, only 3 percent pay the national minimum wage to some of their employees. Only 6 percent of the respondents pay a state-mandated minimum wage to some of their employees. The remaining respondents (91 percent) are not affected by minimum wage laws because they pay all of their employees more than the minimum wage.

The survey confirms what SurePayroll has been hearing anecdotally from many of its 18,000 small business customers who use SurePayroll's payroll outsourcing service.

"Most small businesses are paying more than the national minimum-wage, so an increase in the minimum wage has little to no effect on those small businesses," SurePayroll President Michael Alter said. "In my conversations with small-business owners, even if they are subject to minimum wage laws, they are not too worried about the increase. In fact, the majority of small businesses support an increase."

Although most small businesses are not affected by the minimum wage, SurePayroll's survey confirms that the large majority (70 percent) support increasing the national minimum wage. However, opinions vary as to how large the increase should be:

Poll question:

Congress is currently considering raising the minimum wage to $7.25. What is your opinion on this issue?

(309 respondents)
I don't think there should be any increase - 25.6%
I support an increase but think $7.25 is too high - 21%
I think there should be an increase to $7.25 - 37.9%
I think the increase should be higher than $7.25 - 11%
Don't know or don't care - 4.5%

In terms of impact on small businesses, most small businesses (79.5 percent) say an increase in the minimum wage will have no impact on their businesses. 15.6 percent say the increase will have a negative impact, while 4.9 percent say the increase will have a positive impact.

Interestingly, while many businesses indicate that their businesses will not be affected by the minimum wage increase, they expect the overall effect on the small business economy will be negative. In fact, nearly 59 percent of respondents indicate that the rise in the minimum wage will have an inflationary effect on the economy and nearly 10 percent believe that many business owners will close down as a result of the increase:

Poll question:

Generally speaking, what effect do you think a minimum wage increase to $7.25 will have on the small business economy?

(308 respondents)
Very little effect - 23.3%
Business owners will survive but will raise their prices - 58.6%
Many business owners will close down, destroying jobs in the process - 9.7%
Other - 8.4%

Despite their misgivings about the minimum wage increase, many respondents (35 percent) believe that increasing the minimum wage could help reduce poverty. The majority (65 percent), however, do not believe that increasing the minimum wage will help reduce poverty.

On a final note, many small business owners don't seem to like the idea that they will have to pay a higher minimum wage without receiving any offsetting breaks. In fact, nearly 69 percent of respondents say that small businesses receive some breaks to offset the minimum wage increase, whereas over 31 percent say no offsetting breaks should be given.

Survey respondents were given an opportunity to voice their opinion on the minimum wage issue. A sampling of comments is provided below.

Comments from Respondents Who Are For the Increase

"Small business owners need to be profitable. However, the nation's poor need to be able to feed their families also. I really don't believe small businesses will be greatly affected by the increase in the minimum wage."

"When you raise the bottom tier workers' wages, they spend more and their comfort level goes up which makes for a happier person, which means they're more productive."

Very few people earning minimum wage are at the poverty level currently so raising the minimum will have little effect on the poverty level."

Comments from Respondents Who Are Against the Increase

"New Jersey's minimum wage is at $7.15 now, and I have yet to see any real good come out of it. Good employees are worth more than minimum wage anyway. No one was supposed to live on minimum wage -- that's supposed to be the starting wages for teenagers. The negatives are not just wages -- the taxes employers pay will all go up, as everyone's wages have to go up, not just the starting wages."

"I believe that supply and demand should dictate what a person makes. It is the ability of every American to improve their own marketability which in turn will increase their worth which will translate into a higher pay scale. This is not an area that government should get involved in. The opportunity or lack thereof is dictated by each individual."

"I've always believed that for every employee you put to work, you should receive a credit, similar to the child tax credit -- basically being rewarded for adding employees, not hit with higher taxes, i.e. workers' comp and other taxes. Where's the incentive to add new employees? Small businesses should be rewarded by the government, not penalized."

SurePayroll's survey was conducted during the week of January 8, 2007. Total respondents numbered 311, providing statistically significant results at the 95% confidence level and a margin of error of +/- 5%. Respondents were selected randomly from across the nation from a sample set of over 18,000 small businesses. Complete survey results are available to interested members of the media.

About SurePayroll
Privately held SurePayroll is America's fifth largest full-service payroll provider and the nation's largest online full-service payroll provider. SurePayroll is passionate about small businesses and their payroll. They are dedicated to providing an extremely friendly and simple payroll experience -- at a price small business owners can afford.

In addition to providing payroll services directly to small business, SurePayroll also provides a private-label payroll service that allows SurePayroll's numerous partners to offer payroll processing to their small business clients. Business partners include ABN AMRO, Pitney Bowes, and MasterCard. SurePayroll processed nearly $3 billion in employee and contractor payroll payments in 2006. For more information, visit www.surepayroll.com.