A somewhat controversial subject matter for small business owners is the minimum wage and how it can be worked into their financial plan. Though also a federal law, first passed in the Fair Labor Standards Act, a number of states have enacted their own minimum wage legislation, requiring that companies compensate their workers with a minimum amount of earnings for every hour on the clock.
During his State of the Union address, President Barack Obama advocated that Congress raise the national minimum wage.
"To everyone in this Congress who still refuses to raise the minimum wage, I say this: If you truly believe you could work full-time and support a family on less than $15,000 a year, go try it," Obama said during his State of the Union address on Jan. 20. "If not, vote to give millions of the hardest-working people in America a raise."
He added that while raising the minimum wage won't make anyone rich or achieve vast amounts of wealth, it has the potential to help million of families better adjust to the cost of living.
Currently, the national minimum wage is $7.25, according to the U.S. Department of Labor. The Obama administration wants lawmakers to raise it to $10.10 per hour, specifically for federal workers, but also in hopes that private companies might follow suit.
Presently, 29 states and the District of Columbia have minimum wages that are above the federal level, including Arizona, California, Connecticut, Delaware and Florida just to name a few. Many of these increases have only recently come to pass, such as in Maryland, Massachusetts, Michigan and Rhode Island, as noted by the National Conference of State Legislatures. As of Jan. 1, minimum wages rose in nine states, as directed by state law, among them Oregon, Ohio, Washington, Colorado and Montana.
Most support minimum wage increases
Americans, by and large, are in favor of raising the minimum wage. In 2013, more than three-quarters of U.S. consumers supported raising it to $9 per hour. Just 22 percent were opposed to the idea. Additionally, nearly 70 percent said that wage levels should adjust automatically for inflation. Some states, such as Arizona, adjust the rate higher every year based on a cost of living formula. The minimum is presently $8.05 in the Grand Canyon State.
Earnings growth – or lack there of – may be at the core of Americans' desire to see a higher minimum wage. Insufficient salaries and health care costs were cited as the most important financial problems facing American families in a separate Gallup survey. Roughly 14 percent of respondents said low income was the biggest financial problem facing the country, up from 13 percent last year, but down from 18 percent in 2012.
Take-home pay has also diminished for most Americans. Median incomes have fallen to slightly more than $53,000, down from $55,000 before 2009.
Wage floors in other parts of the world with labor laws in place are much higher than in the U.S. In Australia, for example, the minimum amount workers older than 20 years old make is $13.55 an hour, up 60 percent since 2000, according to the Wall Street Journal. Economists opposed to raising the minimum wage say that Australia's high unemployment rate suggests that increasing it can have a deleterious effect on job growth.
"High minimum wages inhibit growth in jobs for workers on the edge of the labor force," Ross Garnaut, economic adviser to the government of Australia, told the WSJ.
Other countries where the minimum wage is higher than the U.S.' relative to median wages include France, Belgium, the United Kingdom, Luxembourg and the Netherlands.