Moral Low Ground

Economy

San Francisco Has Nation’s Highest Minimum Wage, Fastest Small Business Growth

(Photo: Brett Wilkins)

(Photo: Brett Wilkins)

The US city and state with the highest minimum wages are also the two places enjoying the fastest small business growth in the nation, presenting a conundrum for those who claim raising the minimum wage harms small business.

Leading payroll processor Paychex and the information analytics firm IHS have released a new small business jobs index revealing San Francisco as the US city where small businesses are growing faster than anywhere else in the nation. The data also shows Washington outpacing all other states in small business growth.

San Francisco and Washington also happen to be the city and state with the highest minimum wages in America.

In San Francisco, where the minimum wage is indexed to inflation and rises annually, workers must earn at least $10.74 per hour, the most of any major US city. In Washington, the minimum wage is also tied to inflation and is currently $9.32 per hour, the highest in the nation.

Small business growth by US metro area (Image: Paychex)

Small business growth by US metro area (Image: Paychex)

Not only does Washington’s small business growth lead the nation, overall annual job growth in the state over the 15 years since residents voted to raise the minimum wage has averaged 0.8 percent, 0.3 percent higher than the national rate. Payroll at Washington restaurants and bars, which are considered by many conservative economists to be particularly vulnerable to higher wage costs, has increased 21 percent.

Small business growth by state (Image: Paychex)

Small business growth by state (Image: Paychex)

The Paychex/IHS data only measured statistics for businesses with fewer than 50 employees, and did not account for broader trends like the Silicon Valley and Seattle-area tech boom that could affect job growth.

But the new data still presents something of a dilemma for conservatives and others who argue that increasing the minimum wage to $10.10 per hour, as advocated by President Barack Obama, would kill jobs and harm business.

“It’s hard to see that the state of Washington has paid a heavy penalty for having a higher minimum wage than the rest of the country,” Gary Burtless, an economist at the non-partisan Brookings Institution, told Bloomberg.

Proponents of a higher minimum wage argue it would boost an economic recovery that has benefited mostly wealthy individuals who own stocks. In 2012, University of California-Berkeley economist Emmanuel Saez found that the wealthiest one percent of Americans accounted for nearly all– 93 percent— of the income gains during the sluggish economic recovery.

Meanwhile, most US job growth has been in low-paying service industries like fast-food and retail.

Most, but not all, Republicans vehemently oppose raising the minimum wage. Most conservative politicians and business leaders, who nearly universally accept significant campaign contributions from corporate interests, continue to argue that paying workers more than poverty wages is detrimental to business growth. Notable exceptions include former Massachusetts governor and 2012 presidential nominee Mitt Romney, former Pennsylvania senator and presidential candidate Rick Santorum and former Minnesota governor Tim Pawlenty.

“I think we ought to raise it,” Romney said of the minimum wage, which he believes should be tied to inflation.

“For all the Republicans who… talk about, you know, ‘We’re for the blue-collar worker, we’re for the working person,’ there are some basic things that we should be for. One of them is reasonable increases from time to time in the minimum wage,” said Pawlenty.

But most conservative politicians and economists insist raising the minimum wage will do more harm than good.

“When [business] costs increase, they either have to pass them off through higher prices or produce a product or service at a lower cost,” Michael Saltsman, research director at the conservative Employment Policies Institute, told USA Today. “That means doing it with fewer workers.”

The non-partisan Congressional Budget Office agrees. According to a February CBO report, a $10.10 minimum wage would lift nearly a million Americans out of poverty, but at a cost of 500,000 jobs.

That hasn’t stopped cities and states across the nation from attempting to redress ever-growing income inequality through minimum wage hikes.

Ed Murray, the mayor of Seattle, the city with the second-highest small business growth behind San Francisco, recently outlined a plan to raise that city’s minimum wage to $15 per hour and higher incrementally in the coming years. Voters in the Seattle suburb of SeaTac last year approved a $15 minimum wage, currently the highest anywhere in the nation.

Seven states have passed legislation this year to raise their minimum wages. Connecticut, Hawaii, Maryland and Vermont will soon have minimum wages exceeding $10 per hour.

On the local level, San Francisco, San Jose, Washington, DC and Santa Fe, New Mexico are among the cities that have raised their minimum wages.

Most big businesses have reacted negatively to these efforts, despite the fact that a record number of Americans are living in poverty and minimum wage jobs very often do not pay enough to escape poverty.

In Washington, DC, where city leaders proposed a bill mandating a $12.50 minimum wage for companies with sales over $1 billion, Walmart threatened to scrap plans to build three new stores in the city. The ‘living wage’ bill was approved by the city council but vetoed by Mayor Vincent Grey.

A recent study by University of Massachusetts-Amherst economist Arindrajit Dube found that raising the federal minimum wage to $10.10 per hour would lift some five million Americans out of poverty.

The current $7.25 federal hourly minimum wage is 27 percent lower than it was in 1968 when adjusted for inflation.

The minimum wage debate is once again in the media spotlight as fast-food workers in hundreds of cities in the United States and around the world staged a massive walk-off strike on Thursday, with US workers demanding a $15 per hour minimum wage, better working conditions and an end to wage theft.

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