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Fight Over Minimum-Wage Hike Heats Up on Main Street

Tuesday, 26 Mar 2013 | 1:37 PM ET
Fuse | Getty Images

The fight over an increase to the minimum-wage, which many small businesses pay their employees, has already begun in Congress. And small employers on both sides of the issue — armed with plenty of Tweets, videos, press releases and data — have entered the fray.

President Barack Obama has proposed raising the federal minimum wage to $9 from the current $7.25 per hour. The current level equals an annual income of about $15,000. The last minimum-wage increase to $7.25 was in July 2009.

Plenty of Detractors ...

The National Federation of Independent Business, which represents smaller employers and independent businesses, recently released an online video that highlights why raising the minimum wage is bad for small business and the bottom line. It was posted on YouTube last week and Tweeted.

On the video, NFIB's Chief Economist Bill Dunkelberg dismisses the often-used argument that raising the minimum wage fuels growth by giving low-income workers more money to spend in the economy, and lifts them out of poverty.

"Every dollar in minimum wage a worker receives comes out of the pockets of consumers in the community, so there is no overall increase in spending power as supporters have lead," Dunkelberg says.

Dunkelberg notes raising the minimum wage is a bad for business because the increase doesn't help the poor, most of whom aren't working; costs jobs; cuts job opportunities for the young; raises the price of goods produced with a lot of labor services; and reduces the purchasing power of consumers, when owners raise prices to cover increased costs.

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And Backers, Too

But backers of a higher minimum wage have been busy too, cobbling together press releases — complete with names, locations and comments from small-business owners. High-profile CEOs of publicly-traded companies such as Costco and Starbucks have also stepped into the minimum-wage debate.

"The minimum-wage issue is a double-edged sword," Howard Schultz, chief executive of the coffee giant, told CNBC last week.

"On balance, I am a supporter of the minimum wage going up," Schultz said. "We've got to be very, very careful and be careful what we wish for because some employers — and there could be a lot of them — will be scared away from hiring new people or creating incremental hours for part-time people as a result of that wage going up."

Other supporters include the Business for a Fair Minimum Wage, a network of business owners and executives. Backers of a higher minimum wage point to studies that have found an increase in minimum wages did not result in job cuts.

Adjusted for inflation, a minimum-wage worker had more purchasing power — in other words could buy more groceries and gasoline — more than 40 years ago compared to the minimum wage worker making $7.25 an hour today, said Holly Sklar, founder and director of Business for a Fair Minimum Wage.

"You can't have the real value of the wage, the real adjusted value going down. You can't build an economy on these downward mobile wages," she said.

Meanwhile, "corporate profits are at their highest since 1950, as a percentage of national income, while the share going to employees is near its low point. We can't build a strong economy on a falling wage floor," the group said in a separate press release.

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Tilman Fertitta, Landry's Inc. chairman & CEO, discusses employment, minimum wage, and why he took his company private.

A Lot at Stake

Whether you're for or against the minimum-wage hike, the potential change comes with much at stake for both Main Street and the broader economy. Corporate profits have been rising along with new records for the stock market. But small employers, for the most part, have failed to generate robust job growth, which has traditionally paved the way for past economic recoveries.

In its monthly small-business sentiment reading for February, the NFIB said the small-business optimism index edged up 1.9 points to 90.8 points from 88.9 points in January. Despite the slight uptick, the February index reading remains on par with the 2008 average, and below the trough of the 1991-92 and 2001-02 recessions. Bottom line: there's no surge in confidence among small-business owners.

(Read more: Little Main St. Hiring, Despite Uptick in Optimism)

Just ask Tilman Fertitta, chairman and chief executive of privately held Landry's. The dining and hospitality group spans 500 outlets and popular brands such as Landry's Seafood House, Chart House, Bubba Gump Shrimp, Claim Jumper, Morton's The Steakhouse, McCormick & Schmick's and Rainforest Cafe.

Appearing on CNBC last week, Fertitta was asked whether raising the minimum wage to $9 an hour would help Main Street lure more workers off the unemployment lines. Fertitta noted the extended unemployment benefits — ironically stretched out to stimulate the economy — has made it trickier for mom-and-pops to hire low-wage workers, some of whom pocket more money by staying home and collecting an unemployment check than actually taking a job.

"If they do some of the crazy things they're talking about doing with minimum wage, we're going to all be laying people off and you're going to see unemployment at 12 percent," Fertitta said.

But other business leaders argue good wages makes good business sense. "We pay a starting hourly wage of $11.50 in all states where we do business, and we are still able to keep our overhead costs low," said Craig Jelinek, Costco's president and chief executive. He was cited in a press release for the Business for a Fair Minimum Wage.

"An important reason for the success of Costco's business model is the attraction and retention of great employees," Jelinek said.

(Read more: Landry's CEO: Unemployment Benefits Hurt Main Street Hiring)

By CNBC's Heesun Wee; Follow her on Twitter @heesunwee

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