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Your Business: Minimum-Wage Laws in the Spotlight

In the November 2020 election, Florida voters approved an initiative to increase the minimum wage incrementally to $15 per hour by 2026. Eight states (plus the District of Columbia) have passed legislation to raise the minimum wage in steps to $15, but Florida will be the first state to do so through a ballot measure.1 Considering the obvious appeal of bigger paychecks among working-class voters, the minimum wage could become a bigger issue in more places.

Employer points to a clipboard while he and employee have coffee.

State labor laws vary widely, and there has been more pressure to raise the minimum wage in states with higher living costs. Twenty-nine states and the District of Columbia have minimum wages higher than the federal wage floor of $7.25, which hasn’t been adjusted since 2009.2 Some cities have enacted minimums that exceed state levels, and a few large employers have increased pay for entry-level employees nationwide, making it more expensive for smaller businesses to compete for workers.3

The Biden administration supports phasing in a $15 federal minimum wage, but a closely divided Congress could make that a difficult feat.4 Either way, many small businesses may face challenges as state-level wage increases take effect over the next few years.

Economic Impact

Proponents of raising the minimum wage say it helps to reduce poverty and income inequality, boosts consumers’ buying power, and stimulates economic growth. Opponents believe that steep increases might cause jobs to be eliminated, especially in lower-wage areas. A 2021 report by the nonpartisan Congressional Budget Office estimated that raising the federal minimum wage to $15 would lift 0.9 million Americans out of poverty and cause 1.4 million job losses.5

Rising wage costs can be particularly hard on the balance sheets of small businesses, many of which are already struggling to stay above water during the pandemic. Increases in the minimum wage influence labor costs throughout a business, because more experienced employees generally expect to be compensated accordingly.

Survival Tips

Preparing for pending wage increases may put you in a better position to absorb the cost and limit the impact on your workforce.

1, 4) The Wall Street Journal, November 27, 2020
2) U.S. Department of Labor, 2020
3) Bloomberg Businessweek, November 17, 2020
5) Congressional Budget Office, 2021

This information is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek guidance from an independent tax or legal professional. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2021 Broadridge Financial Solutions, Inc.