AOC-supported minimum wages of $25 can affect small businesses and red counties
DeLuca’s Italian Restaurant owner Robert DeLuca discusses running a small business in New York, citing policy shifts, rising labor costs and the impact of tax cuts on ‘FOX Business In Depth.’
The proposal supported by Rep. Alexandria Ocasio-Cortez’s move to raise the federal minimum wage to $25 an hour drew warnings from economists, who said the plan could squeeze small businesses and hit red states harder.
Because many red states sit close to the federal floor of $7.25, the move would more than triple wages in those states — which economists say would be difficult for small businesses to earn, raising the risk of higher prices, reduced employment and economic hardship.
“That’s one of the most common mistakes people fall into. Many believe that raising the minimum wage will solve everything, that wages will go up while prices stay the same,” Santiago Vidal Calvo, a policy analyst at the Manhattan Institute, told Fox News Digital. “But that’s Econ 101, it doesn’t work like that.”
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Rep. Alexandria Ocasio-Cortez, D-N.Y., has called for an increase in the federal minimum wage to address affordability concerns. (Tom Williams/CQ-Roll Call/Getty Images/Getty Images)
He warned the proposal could have a negative impact on young and low-wage workers as businesses begin to reduce labor costs by reducing hours, cutting jobs or turning to automation.
Rebecca Paxton, director of research at the Employment Policies Institute, said opposition to the wage increase is widespread among economists.
“We surveyed more than 160 American economists and found that 96% oppose proposals above $20 an hour,” Paxton told Fox News Digital, adding that the concern is particularly expressed in small industries such as hotels and restaurants, where high labor costs can lead to job losses and make it difficult for businesses to operate.
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Nicole Huyer, a senior researcher at the Thomas A. Roe Institute for Economic Policy Studies, said that pressure can force businesses to make tough decisions.
“Small businesses will look to cut costs by any means necessary,” said Huyer. “That includes raising prices, laying off workers, reducing hours or moving out altogether.”
The federal minimum wage has remained at $7.25 an hour since 2009, as some states have pushed the minimum wage above $15 — widening the gap between high- and low-wage economies.
States like California and New York now mandate minimum wages above $16 an hour, while others, including Texas and North Dakota, stay on the state base. Economists also warn that higher labor costs could accelerate automation in industries such as grocery stores and fast food, where margins are thin and entry-level jobs are common.
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Experts warn that raising the minimum wage to $20 an hour will hurt small businesses. (Jeffrey Greenberg/Universal Images Group/Getty Images/Getty Images)
Small business owners in low-income states may be particularly vulnerable, as they often operate with tighter constraints and less ability to absorb sudden cost increases than firms in high-cost states.
As with proposals for raising the minimum wage in the state, the debate can be heated as to whether a single national level would make a big difference to the state’s economy, or whether wage policy is best left to the states.
