As it stands now, the federal set minimum wage is $7.25 an hour, but the start of 2016 saw an increase of wages for many cities, states, and companies that (in some cases) put them well above the country’s minimum wage. Beginning New Year’s Day, 14 states increased their minimum wage above the federal standard; and several more states, like California and New York, have policies in the works that will increase minimum wages to $15 an hour from $10 and $9 respectively.
In addition, several large cities including Seattle, San Francisco, and Los Angeles are implementing their own higher wage rates outside their state’s set levels. Even more shocking, several big companies such as Target, McDonalds, and Facebook are also increasing wage rates. With so much emphasis on higher wages, should small businesses in the states that are holding to lower hourly wages consider following those states and companies that have elected to raise wages?
Some people argue that higher pay results in higher prices for both services and goods. This, they state, only serves to hurt the local economy. In these cases, the higher initial pay is offset by and increased cost of living. These people also argue that increased pay also means that many employees will experience reduced benefits to cancel out the cost of filling starting positions—after all, the money has to come from somewhere.
However, some argue that higher minimum wages makes for happier employees that work better and stay longer. Content employees, they say, are essential to a company’s longevity because it means that productivity is increased and less resources are wasted training replacements for jobs that have revolving doors in companies where the pay is lower. For these reasons, many small businesses are choosing to increase their wage rates while some start out at the federal set minimum wage, and then, through pay raises, increase their employee’s wages dramatically once certain criteria are met such as meeting productivity goals or being at the job for a certain amount of time.