The Minimum Wage Faces Maximum Flak

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The No. 1 rule in the Hitchhiker's Guide to the Galaxy is "Don't Panic." That's the message small business might want to take to heart now as the House of Representatives embarks on passing promised legislation during its first 100 hours. Yesterday the House kept one of its pledges by approving a bill that would increase the federal minimum wage to $7.25 from $5.15 over two years, the first such increase in almost a decade.

With a tight labor market, many small businesses aren't concerned about the change at the moment. But lobbying groups such as the International Franchise Association and the National Federation of Independent Business decried the minimum-wage increase, saying that the ripple effect on wages would be burdensome to small businesses. Other advocates worry about what the wage floor will mean if the economy heads downhill and small businesses can't cut wages.

Senators heeded the alarm. Later this month they are set to discuss their own version of the bill, replete with enough honey to woo small-business advocates. The only question there is how much to sweeten the pot. As now proposed, the bill would give tax breaks worth $8 billion to small business. Senate Republicans are calling for twice that amount. Plus, they want to create small-business health insurance pools to offset the rising costs of providing coverage. Senate Democrats refuse to support that measure, saying it would allow companies to opt out of state insurance rules.

Even the White House threw in its two cents. It praised the Senate small-business tax breaks and opposed the House minimum-wage increase. While the House got the ball rolling, it's unclear if a minimum-wage increase will even pass and what it would look like, much less whether the president would ever sign it. So for now, small businesses should take a deep breath and relax.

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small business
minimum wage

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