Higher Minimum Wage 'Boosts' Small Businesses, Kerry Says

By Susan Jones | July 7, 2008 | 8:23 PM EDT

(CNSNews.com) - Sen. John F. Kerry, who bills himself as a champion of small business, says the higher minimum wage not only "boosts" workers, but small businesses, too. But the U.S. Chamber of Commerce says the higher minimum wage will have a detrimental effect on small businesses.

On Tuesday, the federal minimum wage rose from $5.15 to $5.85 an hour, the first of three increases. Next year, it will rise to $6.55 an hour, then to $7.25 in July 2009.

Kerry, who chairs the Committee on Small Business and Entrepreneurship, pointed to a Gallup poll from last year that found 86 percent of small businesses would not be impacted by an increase in the minimum wage.

"In order for America to remain truly competitive in a global economy, we must invest in our workforce to stimulate small business growth. Small businesses create two-thirds of all new jobs in this country, and the vast majority of them are paying their new workers higher than the minimum wage," Kerry said Thursday in a news release.

"It's no secret that good wages result in increased productivity, ultimately improving a firm's bottom line and economic development in their community," Kerry said.

Kerry noted that the last time Congress raised the minimum wage (in 1997) "our country experienced the strongest economic growth in decades," with lower unemployment, lower poverty rates, and lower inflation. (Also in 1997, President Bill Clinton signed the Taxpayer Relief Act of 1997, reducing rates mostly for middle-class taxpayers.)

"Small businesses get it," Kerry said on Thursday. "By raising the minimum wage, we're creating a prosperous future for our small businesses, their workers and their families."

In a speech earlier this month, Kerry said he's working to pass legislation that will help entrepreneurs get financing and training, help small businesses survive disaster, protect their access to federal contracts, improve energy efficiency, and reduce health care costs.

"These are my priorities in Washington, but the reality is small businesses don't care whether it comes from federal and state programs -- they just want help," Kerry said.

'Bad business'

The U.S. Chamber of Commerce points to a survey showing that nearly 60 percent of small business owners will not be able to offset the cost of the minimum wage increase.

"Mandating that small companies pay minimum wage workers at a rate higher than what these companies can afford, is bad business," the Chamber said in a news release.

"This survey confirms that the raise drives up costs for everyone and that fewer jobs for low wage earners will be created," said Marc Freedman, the Chamber's director of labor policy.

"Even this modest increase will hurt free enterprise, and the increases which will go into effect in 2008 and 2009 are likely to have an even greater negative impact."

The Chamber says small businesses typically have the hardest time absorbing increases in the minimum wage. Nearly 70 percent of the businesses surveyed responded that they might have to raise their prices to cover the increase in the minimum wage.

Over 20 percent will not be growing their staff as planned, the survey said.

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