Minimum Wage Increase Sparks Fear Among Small Business Owners

Mar 14, 2013, 08:00 ET from Loans Org, LLC

LOS ANGELES, March 14, 2013 /PRNewswire/ -- The last increase in the federal minimum wage was in July 2009, raising the rate to a meager $7.25 per hour.

Over three years have passed — nothing has changed.

But would a $1.75 increase really impact the national economy in a negative way, as feared?

In an exclusive interview with, Steven Raz, co-founder and managing partner of Cornerstone Search Group, said that an increase could be the final straw in a long list of hits against small businesses.

"It's going to do the opposite of what is intended. I think this could be a job killer for a lot of businesses that hire at that level," he said.

Raz said that the economic tailspin, Obamacare and the growing national deficit are hitting businesses hard.

"Anyone pushing a minimum wage increase knows that could have a potentially negative effect," he said to "I'm hoping it's not going to be the perfect storm."

One fear resounding after Obama's speech is that of job elimination. If businesses are forced to pay their minimum wage workers more, then they will have less funding and be forced to employ less workers for fewer hours.

Rohit Arora, CEO of Biz2Credit, said retail companies with large forces of minimum wage workers will likely have to reduce employee's hours to less than 30 hours per week to balance out the increase.

Arora told that the potential increase will hurt employees in the long run due to a loss of jobs.

"Increasing the minimum wage makes some politicians feel good, but if they really want to help people, the government should support measures to retrain workers and give them marketable skills in the twentieth century economy," he said.

But two reports disagree.

The first report by the Economic Policy Institute (EPI), found that increasing the federal minimum wage would not cause job loss, but rather a proposed increase to $10.10 per hour would generate about 140,000 new jobs.

The second study by the Federal Reserve Bank of Chicago found that increases in the minimum wage rate positively affects consumer spending because consumer debt, especially for new loans, rose after a minimum wage increase. Retailers in the consumer goods, electronics, automobile and home appliance sectors could see a sizable increase in business if the proposal is passed.

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