A minimum wage hike may not crush small businesses: Survey

Elaine Pofeldt, special to CNBC.com
Thomas Barwick | Getty Images

With a debate heating up over how the rise in the minimum wage will affect job growth — especially in the small-business arena — new findings reveal surprising truths.

In their latest survey of small-business owners, Manta, a social network for entrepreneurs, found they were almost evenly split on the issue, with 51 percent favoring raising the minimum wage and 49 percent against it. Among the respondents, 46 percent of owners said raising the minimum wage would hurt their business, while 26 percent said it would have a positive effect.

Manta surveyed 1,099 small-business owners in April in the poll on its site.

John Swanciger, CEO of Manta, said he was initially surprised by the percentage of small-business owners who support a minimum wage increase. But after studying Manta's data, he said, "The overarching theme I've come to realize is the great majority of small businesses are already paying minimum wage, either well over it or somewhat over it."

Among those who supported raising the minimum wage in Manta's survey, half said they supported raising the minimum wage to $15 an hour, while 30 percent said they'd favor raising it to $12 and 20 percent supported raising it to $10.

Support for raising the minimum wage varied by industry. Owners of business services firms voiced the highest support, with 58 percent favoring a minimum wage increase. Not far behind were construction, with 50 percent of owners favoring a minimum wage increase and 47 percent of owners in retail supporting it. In consumer products and services businesses and agriculture, however, only 38 percent of owners support a minimum wage increase.

David Titterington has made a deliberate choice to pay his team more than Nebraska's $9-per-hour minimum wage. Titterington owns Wild Bird Habitat, a small business that sells items such as birdbaths and squirrel feeders from two stores in Lincoln, Nebraska. He said he pays everyone on his 12-person team at least $11 an hour to attract people who have the right expertise in wildlife. Plus, he said, it's the right thing to do.

"I think everyone is entitled to make a fair wage," said Titterington, whose business generates just under $1 million in annual revenue.

With California and New York becoming the first states to increase the minimum wage to $15 earlier this year and the debate over the minimum wage raging in many cities, there is little agreement over how such wage increases will affect small business.

The $15 minimum wage will take effect in California by 2022. In New York State it will start to take effect in 2018 for many New York City businesses and phase in gradually in the rest of the state. At least 16 states are slated to raise their minimum wage in 2016.

Some business groups have opposed local pushes to bump up wages for hourly workers, arguing that employers can't afford the added overhead and will have to pass the costs along to consumers or cut jobs in response. The National Restaurant Association has challenged New York State's minimum wage law — which requires employers to pay fast-food workers $15 an hour — in court, arguing that it discriminates against restaurant owners.

But small-business owners' reaction to the movement for higher wages is often more nuanced, with some sharing Titterington's position.

Many owners find they have to pay more than the minimum wage to prevent turnover. Gary Hu, owner of Check Maid Cleaning, a 50-employee residential cleaning business based in New York City, is among them.

When he started the business in 2012, he hired cleaners as independent contractors and last year made all of them W-2 employees. Initially, they earned $10 or $11 an hour, but turnover was high, a factor compounded by the fact that he cannot afford to provide health insurance.

"A lot of people would leave after a month or two for jobs that paid them even less but where they could get group health care," he said.

To gain an edge, Hu raised their wages to $15 an hour, before tips, earlier this year. Since then, he has seen turnover dip from five to 10 cleaners a month to one or two, he said.

Others find that paying more than the minimum wage helps attract workers with a positive attitude.

Workers at &pizza now get paid more than the minimum wage.
Source: DC Inno | GRVTY

Michael Lastoria, co-founder and CEO of &pizza, a 14-location restaurant chain based in Washington, D.C., paid some workers the minimum wage when he started it in 2012. But as the business grew, he said, he changed wages "pretty dramatically" and now pays all of his 350 workers more than the District of Columbia's minimum wage of $10.50 per hour.

One reason he raised wages was to attract workers who would treat customers so well they wanted to come back.

"I'm of the belief that if you do the right thing, put your best foot forward and compensate people in a healthy way, they will do the right thing for your customer," Lastoria said. "Greater loyalty leads to higher revenue."

— By Elaine Pofeldt, special to CNBC.com