How to Prepare for Potential Minimum Wage Increase

The political debate is loud and passionate about raising minimum wages. While nothing has been decided yet, here are some facts about what we do know:
  • The Federal government has not raised the minimum wage since 2009 when it was increased from $6.55 to $7.25.
  • The inflation rate increased at least 2% per year in each year since the last minimum wage increase.
  • With a 2% inflation per year, the minimum wage worker has lost $0.12 per hour for every hour worked in 2015 compared to 2009.
  • Since 2011, many employers of minimum wage earners have increased their revenue 10% or more. For example: Wal-Mart, one of the nation’s largest minimum wage employers has grown its revenue from approximately $107 to $120.6 billion.
  • The political winds are increasingly for raising the federal minimum wage, so it is probably not a matter of if but a matter of when.

How Does Minimum Wage Affect Small Businesses?
The trend to increase the minimum wage continues in a state by state manner. As of October 2015, 29 states and DC had a minimum wage higher than the federal minimum wage of $7.25. Only 21 states use the federal minimum wage.
Small businesses will have to find new ways of overcoming any negative consequences created by the increase, but do not overreact. Anticipating potential financial impacts while planning and implementing a well-reasoned business strategy will provide success.

Preparing Your Small Business
There may be little or nothing local small business owners can do to avoid a minimum wage increase, but preparing is critical to success. Here are four important steps small businesses can take to prepare:

1. Improve work processes – Inefficient work processes decrease productivity and increase operating expenses. You should analyze what your employees spend their time doing. Eliminate redundant and wasteful workflow. By increasing work process efficiency and cutting waste, small businesses can more than make up for a modest minimum wage increase.

2. Outsource or automate (where possible) – Companies, such as ours, who specialize in human resources, can streamline your operations and provide a lower cost option for your business. Many other firms that offer outsourced functions can also help increase efficiency to your company. Technology provides multiple ways to improve productivity, utilize it!

3. Develop a plan for more sales – Increasing your customer base, generating repeat orders, and broadening your target market will help you increase revenue.

4. Reduce or eliminate overtime – sometimes overtime can’t be avoided but excessive use of overtime can be a costly way to run a business.


An increase in minimum wage may negatively impact your pricing and operational business models short-term; however, implementing the long-term solutions outlined above can benefit your company, as well as the society.

Contact us if you need help evaluating your opportunities for improved efficiency, outsourcing, automation, or even developing sales. We have a solution for some of these options, and we have resources to help you with the others.


Helpful Minimum Wage Tool

MIT has developed a handy tool or minimum wage calculator based on location and life circumstances. The info is displayed to show living wage, poverty wage and minimum wage for particular households. It also provides an average salary and expenditure schedule. Check out the Wage Calculator!

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