A huge controversy in the economics world in 2012 has been a possible raise of the minimum wage from $7.25 to $9.00. Many supporters of this increase believe that a $9.00 minimum wage would enable many adults to make enough money to live off for a year. This wage increase would give low-income families a chance to make more money to support themselves and their families. Following this, supporters say these so called “low-income” families would spend more, thus resulting in an increased flow of money in the economy.
However, what these supporters do not see is, many of these families will go to large department stores or super stores to make their purchases. With these large stores getting all the money many small businesses will be forced to close their doors. In addition to small businesses losing these customers, employers will be faced with another tough decision. In many small businesses employees are paid based on their skill, position, or time of employment. Many of these workers are paid the minimum wage because employers of a small business are unable to pay them any higher in order to keep their store or shop open.
So what happens? Employees that currently being paid $7.25 will now be paid $9.00 and those higher level employees being paid $9.00 would be also given an approximant pay raise to $11.00 per hour. Now, how does this hurt small business owners? Here is a possible scenario. Max is the owner of a small sports shop in Waverly that has been open for ten years. He also employees seven workers not including himself, as the employer Max chooses to pay his three full time employees $9.00 per hour and the other four employees $7.25. Max is able to pay his main employees $9.00 per hour because of businesses yearly earnings. Last month Max found out that in 2014 there was going to be an increase in the minimum wage to $9.00 per hour, the rate in which he pays his three full time employees. With this wage raise, Max will be unable to pay all of his employees fairly; in addition to that Max’s business may be in jeopardy. In hope to save his business Max had to let go of three part-time employees, he also chose to make two of his full-time employees part-time. Now Max has only four employees, three who are paid the new minimum wage of $9.00 and one that is paid $10.00 the most that Max is able to offer. However, after six months of the wage raise Max notices a decline in buyers, his business is no longer making enough money to even pay four employees. With this decline in earnings Max has no choice but to close his small business.
Speaking in a more economic sense, an important example to a price floor is the minimum wage. When examining the effects of minimum wage the markets for labor are highly considered. In Max’s case, the new minimum wage is above the equilibrium level, and the quantity of labor that is supplied exceeds the quantity demanded. When this labor surplus is present unemployment is also present. When this happens, the minimum wage raises the incomes of those that already have jobs and are making money, however what many supporters of the minimum wage raise forget this raise lowers the incomes of the many workers who cannot find jobs. With this higher wage, owners like Max will be letting employees go instead of hiring those who really need jobs.
When many supporters speak about the benefit of the raise they often forget about the many teenagers looking for a part-time job at a small business. The minimum wage impacts teens at such a higher level than adults because they are the least skilled and experienced members of the labor force. Many economists have studied how the minimum wage laws affect the teenage labor market and have compared the changes in minimum wage over time with the changes in teenage employment in small businesses. The study found that with a ten percent increase in the minimum wage the teenage employment rate decreases one to three percent. With a wage raise many employers like Max would completely forget about hiring an unskilled teenager even if the pay was minimum wage.
You see, with this possible raise in minimum wage small businesses have much more at stake than department stores. This raise forces employers to let go of their hard workers, in hope to save what they once worked so hard to get up and running. This doesn’t only happen in just one small business, when one starts to suffer there is no question that others are too. With the decline in employment, there are fewer employees in the community thus resulting in less money for consumers to support small businesses. And without consumers, the doors of the small businesses in our communities will be forced to close for good.

Mankiw, N. Gregory. Principles of Microeconomics . 6th ed. Manson, OH: South-Western, Cengage Learning, 2012, 2009. 117-119. Print.