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Minimum Wage Increase? Eh…

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–Sixty percent of small business owners surveyed say increasing minimum wage would hurt small businesses, while approximately 60 percent also said they would not reduce workforce or benefits if an increase occurred.

–Small business optimism remains unchanged from the previous quarter.

–Business owners say finding new business, the economy, healthcare and government are biggest challenges facing their businesses today.

Small business owners are divided on whether the national minimum wage should be increased, and a majority of small business owners say increasing the minimum wage would hurt business owners, in the most recent Wells Fargo/Gallup Small Business Index.

Increasing the minimum wage was one of many concerns conveyed by small business owners in a survey conducted Oct. 23-29, after the government shutdown ended. Overall, optimism among small business owners did not change significantly in the survey.

In the latest Wells Fargo/Gallup Small Business Index, small business owners were divided between those who approve (47 percent) and those who disapprove (50 percent) of a law raising the national minimum wage to $9.50 an hour. This contrasts with a separate recent Gallup poll of the general American public, in which three-fourths of respondents said they supported increasing the minimum wage from the current $7.25 to $9.

In the Wells Fargo/Gallup Small Business Index, 60 percent of survey respondents said increasing the minimum wage would hurt small business owners. About 30 percent reported that an increase in the minimum wage would have little effect on most small business owners. Yet when asked how approval of minimum wage legislation would impact their businesses, approximately 60 percent of small business owners said they would not reduce their current workforce or employee benefits.

The survey results follow recent state and federal government legislation and proposals on the minimum wage, including this month’s passage of a new law in New Jersey that indexes future increases in the minimum wage to inflation. In September, the California state legislature voted to raise the state minimum wage to $10 an hour by 2016. A proposal to raise the minimum wage also is being considered in the U.S. Senate.

Small business optimism

The Wells Fargo/Gallup Small Business Index remained mostly unchanged over the past several months, and is currently at a positive 24 (+24), compared with the third quarter Index score of positive 25 (+25). While it’s the second highest score in the last five years, the Index score is below pre-recession levels.

When business owners were asked to identify the most important challenge facing their businesses, several concerns rose to the top of the list. In the fourth-quarter survey, business owners once again said their top concern was finding new business, yet this concern dropped from 28 percent to 13 percent of responses. Other top concerns include the economy (12 percent), healthcare (11 percent) and government (11 percent). The number of business owners identifying “government” as the most important challenge was much higher this quarter than in the third quarter.

“Small business owners are still in wait-and-see mode,” said Doug Case, Wells Fargo Small Business Segment manager. “As they plan for next year, they are looking for more economic stability. Yet the debates around the debt ceiling and Federal budget signal more uncertainty ahead. And uncertainty suppresses business growth and expansion.”

The survey also found that nearly one in four small business owners expect to have a better operating environment and are more optimistic about their business’s future in 2014. Half of business owners surveyed said they expect the operating environment next year to be about the same as this year.

Small Business Index Key Drivers

Wells Fargo, together with Gallup, surveys small business owners quarterly across the nation to gauge their perceptions of their present situation (past 12 months) and future expectations (next 12 months) in six key areas: financial situation, cash flow, revenues, capital spending allocation, hiring, and credit availability.


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