Keeping up with economic changes that affect your small business can be difficult, especially when it directly impacts your operating costs. But with ongoing talks of raising the minimum wage, which is the minimum amount employers have to pay employees in the United States per hour, you might wonder how it’ll affect your business.
As a small business owner, you likely want to maximize your profits while keeping your employees happy and productive with a competitive salary. But with inflation and minimum wage increases, you might not know how to benefit both sides.
In this article, we’ll go over the impact of small business minimum wage hikes, including expert guidance on paying your employees a livable wage while keeping your business profits in check.
Why there’s a push for higher minimum wage: 6 economic impacts
When inflation rises, it often leads to a push for a higher minimum wage so workers can afford housing and basic needs. But even with the cost of living going up, the federal minimum wage has been $7.25 per hour since 2009, according to the US Department of Labor, which has led many workers and labor activists to fight for a $15 minimum wage.
To gradually increase the minimum wage to $15 an hour in every state by 2025, in 2021, the government reintroduced the Raise the Wage Act—which was first introduced in 2017 and not passed. Some states have started to adopt a $15 minimum wage, including California and Massachusetts. However, with inflation hitting a record high of 9.1% in 2022, states including New York, California, and Massachusetts are now pushing for a $20 minimum wage, according to AP news.
Raising the minimum wage comes with some big economic impacts, including:
- Increase in consumer spending: As workers get paid more, their purchasing power increases, which allows consumers to spend more money, helping to boost the economy.
- Increase in demand for goods and services: With the increase in consumer spending, a higher demand for goods and services boosts the economy.
- Potential impact on employment rates: With higher wages, jobs become more attractive and can boost employment rates for workers looking for a better salary. However, some businesses might hire fewer people due to increased operating expenses.
- Lower poverty rates: Workers can afford basic needs, and families can have a higher income, leading to a stronger economy and lower poverty rates.
- Increase in labor market competition: Overqualified workers might also go after minimum wage positions when the wage is higher, leading to more competition and less experienced workers not having job opportunities.
- Potential lower taxes: With a better standard of living, workers can rely less on government programs, leading to lower long-term taxes.
Nevertheless, according to the Congressional Budget Office, the impacts of a higher minimum wage are uncertain, as it will depend on how fast the government implements changes and how receptive and capable businesses are to paying a higher wage.
How does raising the minimum wage affect small businesses
How will the push for a higher minimum wage potentially impact your small business? Raising the minimum wage brings advantages and disadvantages to your business, both financially and operationally.
Pros of a higher minimum wage for business
When you think of a higher minimum wage, you might worry about affording higher wages and the overall health of your business. However, raising the minimum wage can have surprisingly good benefits.
The positive effects raising the minimum wage might have on small businesses include:
- Increase in productivity: With higher wages, workers can feel more valued and have less financial stress, leading to an increase in employee productivity and job satisfaction.
- Decrease in employee turnover: With increased job satisfaction and higher wages, workers may be less inclined to leave, decreasing employee turnover.
- Boost in qualified workers: Higher wages are more attractive to workers with better qualifications, leading to an opportunity to hire more qualified workers.
- Higher demands: When people can afford basic needs, they can increase their spending budget, leading to a higher demand for your goods and services.
- Less absent workers: Increased work engagement also leads to workers missing work less (aside from illness), leading to higher productivity.
Potential cons of a higher minimum wage for business
Although a higher small business minimum wage can bring certain benefits, there are some ways it can impact your business negatively.
The negative effects raising the minimum wage could have on small businesses include:
- Higher labor costs: When you have to pay employees higher wages, your labor costs will also increase. You might also have to adjust pay for higher-level workers to account for the increase.
- Increase in prices: To afford higher wages, your business might have to increase prices for goods and services, which can lead to customers not being able to afford what you sell.
- Decrease in employment: An increase in labor costs can lead to fewer job opportunities if your business can’t afford to pay for more workers.
- Bigger competition: An increase in prices of goods and services could also lead to more competition, as other businesses might be able to afford higher wages without increasing prices.
- Reduced profits: Increasing your labor costs can also decrease your gross profits, as your costs may be higher than your revenue.
How small businesses can prepare for minimum wage hikes
Whether the minimum wage will stay the same for the next couple of years or it’ll increase in your state, it’s a good idea to stay prepared. By getting your business ready for a potential minimum-wage increase, you and your employees can take advantage of what it brings and minimize the negative effects.
Here’s how you can prepare before minimum wage increases:
- Regularly increase wages: Consider voluntarily raising your wages every year or every couple of months to reduce the impact of a minimum-wage increase and reduce turnover.
- Decrease in expenses: Absorb the impact of increased labor costs by cutting down on wasteful spending. Consider cheaper ways to run your business, such as decreasing energy consumption.
- Increase your prices: Consider increasing the prices of your goods and services in a way that’s justifiable so your customers can still afford them.
- Reduce operating hours: Depending on your business, you might be able to reduce the working hours to reduce operating costs by considering what time of the day you make the most revenue.
- Make changes gradually: Find ways to absorb a higher minimum wage in small increments to reduce the impact on your business and prepare you for the future.
Preparing for a small business minimum wage hike is also about corporate social responsibility. Make sure your employees are getting paid what they deserve so you can have happier and more productive employees.
Minimum wages in all 50 states in 2023
As you may know, minimum wage laws vary by state. Even though there’s a push for an even higher minimum wage, only three states have a minimum wage of $15 and above. Additionally, almost half the 50 states still have the federal minimum wage of $7.25 as their state’s minimum wage.
Here are the minimum wages in each US state in 2023, according to the US Department of Labor (as of article publish date):
- Alabama: $7.25
- Alaska: $10.85
- Arizona: $13.85
- Arkansas: $11.00
- California: $15.50
- Colorado: $13.65
- Connecticut: $14.00
- Delaware: $11.75
- Florida: $11.00
- Georgia: $7.25
- Hawaii: $12.00
- Idaho: $7.25
- Illinois: $13.00
- Indiana: $7.25
- Iowa: $7.25
- Kansas: $7.25
- Kentucky: $7.25
- Louisiana: $7.25
- Maine: $13.80
- Maryland: $13.25
- Massachusetts : $15.00
- Michigan: $10.10
- Minnesota: $10.59
- Mississippi: $7.25
- Missouri: $12.00
- Montana: $9.95
- Nebraska: $10.50
- Nevada: $10.50
- New Hampshire: $7.25
- New Jersey: $14.12
- New Mexico: $12.00
- New York: $14.20
- North Carolina: $7.25
- North Dakota: $7.25
- Ohio: $10.10
- Oklahoma: $7.25
- Oregon: $13.50
- Pennsylvania: $7.25
- Rhode Island: $13.00
- South Carolina: $7.25
- South Dakota: $10.80
- Tennessee: $7.25
- Texas: $7.25
- Utah: $7.25
- Vermont: $13.18
- Virginia: $12.00
- Washington: $15.74
- West Virginia: $8.75
- Wisconsin: $7.25
- Wyoming: $7.25
This article originally appeared on the Quickbooks Resource Center and was syndicated by MediaFeed.org.
Groceries cost the average American family this much every month
https://www.msn.com/en-us/money/personalfinance/groceries-cost-the-average-american-family-this-much-every-month/ss-AA1en9tI
Each month, the USDA publishes a report showing the average costs of groceries at three price levels: budget, moderate, and liberal. Here’s a look at the middle-of-the-road spending for a family of three in 2022. Notice how the average cost of groceries rose more than $87 over the course of the year.
Average Cost of Groceries by Month (in 2022)
- January: $931.14
- February: $943.32
- March: $958.44
- April: $969.36
- May: $983.01
- June: $989.83
- July: $1,001.38
- August: $1,007.05
- September: $1,012.05
- October: $1,015.77
- November: $1,015.35
- December: $1,018.25
coldsnowstorm/istockphoto
No matter the size of your family, your grocery budget can depend largely on the cost of food where you live. For instance, according to data from the Missouri Economic Research and Information Center, people in Hawaii, Alaska, and New York tend to pay more for food than residents of Texas, Idaho, and Michigan. This means $700 per month for groceries may be more reasonable in Texas than in, say, Hawaii.
Creating a household budget and aren’t sure how much to allocate for food? A good rule of thumb is to set aside 10% of your income for groceries and other food costs. So if you take home around $5,000 a month, plan on budgeting $500 for food.
However, you may need to adjust that percentage, especially if you have a larger family or live in an area with a higher cost of living. It may be wise to track how much you spend in any given month on food and see what a reasonable budget would look like for you and your family.
(Learn more atPersonal Loan Calculator).
DjordjeDjurdjevic/istockphoto
What does it mean to prioritize your grocery spending? It’s simply a way to ensure you’re making the most every dollar when you’re grocery shopping on a budget.
One strategy to consider is to set aside money each month automatically so you have enough to spend on food. Another option is to put groceries as one of the top line items in your monthly budget so you don’t forget to set aside money for it first.
It’s also important to scrutinize how much you spend on food and the choices you make in the grocery store aisles. It could be that your grocery budget is fine, but you may need to reel in how much you spend on certain ingredients or find cheaper alternatives.
Above all, though, make sure you settle on a budget that works for you and your family. Be sure it’s enough to cover what’s important to you all while still sticking to your larger spending plan.
Realpictures/istockphoto
It’s easy to give in to temptation at the grocery store, but rest assured, staying within budget is possible. A budget planner app can help, as can these tips:
- Shop at discount retailers: Buying your groceries at lower-priced retailers can add up to significant savings, even better if you’re able to purchase ingredients you need on sale. Some retailers may have rewards programs, helping you earn free or heavily discounted groceries.
- Make pricey purchases go the distance: Meat or related products like eggs tend to cost more than other ingredients. Look into recipes that help you stretch a pack of meat or carton of eggs over several meals.
- Use what you have: Before heading to the grocery store, go through your refrigerator, freezer, and pantry to see what you already have. Besides preventing food waste, this also helps you avoid purchasing items you don’t need.
- Buy store brands: In many cases, store-brand items cost much less than brand-name items. The quality for generic items may also be similar.
- Use coupons: Though it may not seem like it’ll make a huge difference, using coupons or grocery store rebates can help make every cent count. Be sure to do some comparison shopping before you hit the checkout counter. Even with discounts, you may still come out ahead with generic or store-brand versions.
- Embrace meal planning: Making plans can help you estimate your food costs for the week and ensure you only purchase items you need.
- Do a spending audit regularly: Tally up how much you’ve spent and what you’ve spent it on. Look for places to cut back on spending, such as purchasing pricey ingredients that can only be used once.
TommL/istockphoto
Eating out is a luxury, but it can also be done on a budget. Consider the following tips the next time you’re considering a night out on the town:
- Decide how many times a month you want to eat out: Knowing approximately where and how many times you go out in a given month will help you make a realistic budget.
- Consider drinking only water: While it’s tempting to order fancy drinks when you’re out, sticking with water can help you and your family save money.
- Look for weekly specials or discounts: In an attempt to earn your business, many restaurants will offer specials, such as free kids meals or discounted menu items. These deals usually happen on a weekday, though on occasion you may find discounts during restaurants’ busier times as well.
- Budget for tipping: Paying for your meal isn’t the only cost involved in dining out. Make sure to leave enough room so you can tip your server or bartender.
Morsa Images/istockphoto
Sometimes, budgeting will only get you so far. If you need help with food and other necessities, there are some organizations and agencies you may be able to turn to for temporary help:
- Supplemental Nutrition Assistance Program (SNAP): If you can meet the program’s eligibility requirements, the government-run program will give you a monthly stipend to spend on food for you and your family.
- Special Supplemental Nutrition Program for Women, Infants, and Children (WIC): The WIC program is for eligible pregnant women or mothers who have infants up to age 5 who are at risk of not receiving enough nutrients. Note that you’ll need to apply for this government-funded program.
- USDA National Hunger Hotline: If you’re facing food insecurity, you can call the hotline daily from 7am to 10pm ET to find resources like local meal sites or food banks.
- Local food pantries: Many religious organizations, colleges, and other local nonprofits may have food pantries. Call ahead to see when you can receive assistance.
SolStock/istockphoto
Budgeting for grocery costs isn’t always easy, but it’s worth the effort. It may be worth considering looking at average costs in your area as a guideline for how much to budget and looking at ways to save on food to ensure you’re not spending more than you can afford to.
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
*Terms and conditions apply. (Must click on the link to be eligible.) This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the Rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed into SoFi accounts such as cash in SoFi Checking and Savings or loan balances, Stock Bits, fractional shares and cryptocurrency subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. PDF File. SoFi reserves the right to modify or discontinue this offer at any time without notice.
SoFi’s Insights tool offers users the ability to connect both in-house accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
LordHenriVoton/istockphoto
Yuriy Kovtun/istockphoto
Featured Image Credit: amenic181/istockphoto.
