Businesses depend on customers who can afford to buy what they are selling. When millions of workers can’t make ends meet because their wages haven’t kept up with the cost of living, it hurts business and it hurts the economy.
The minimum wage sets the floor under worker paychecks. Stuck at $7.25 an hour since 2009, the federal minimum wage comes to just $15,080 a year for full-time work. When the minimum wage is too low, it not only mires workers in poverty, it undermines the consumer demand at the heart of our economy.
Raising the minimum wage boosts the economy, as low-wage workers are the most likely to spend any additional pay. Their increased buying power translates into more purchases at businesses large and small, and helps boost aggregate consumer demand.
A higher minimum wage makes good economic sense in other ways too. For example, businesses that are more invested in their employees have employees that are more invested in the business.
Low pay typically means high employee turnover. With reduced turnover, businesses see savings on recruiting and training costs. They see less product waste and greater customer satisfaction. Employees often make the difference between repeat customers and lost customers.
When workers are paid enough to live on, they don’t have the continual stress of worrying how they will make rent or afford other basics. They are happier and more productive.
Business support for raising the minimum wage is widespread. In a 2016 survey of 1,000 business executives across the country conducted by LuntzGlobal for the Council of State Chambers, 80% of respondents said they supported raising their state’s minimum wage.
Twenty-nine states have minimum wages that are a little or a lot above the federal $7.25 level. But we need federal action to lift the floor under our economy nationwide and assure an adequate minimum wage wherever people live and do business. Gradually phasing in minimum wage increases enables lower-wage companies to adjust to raises over time and to benefit from lower turnover and increased consumer spending.
Raising America’s minimum wage is smart economic policy.
Holly Sklar is the founder and CEO of Business for a Fair Minimum Wage, a national network of business owners, executives and business organizations that believe a fair minimum wage makes good business sense.