In Oklahoma, it’s not an exaggeration to say that small businesses are the backbone of our economy. In 2018, small businesses accounted for more than half of Oklahoma employment, a figure that exceeded the national rate, so it makes sense that Oklahoma lawmakers created a special incubator program and low tax burdens to encourage entrepreneurship. Still, there are more steps that our lawmakers can take to help small businesses and the driving force behind them. The employees that work in these small businesses are just as important to our economy, and it’s time that we invest in them as well. In a time of rising costs and inflation, there is one key policy change that lawmakers can pass to help small businesses, working Oklahomans, and our economy: Raise the minimum wage.
What’s good for workers is good for business
Raising the minimum wage has become a politically contentious issue, but research shows that it is good policy. A minimum wage is intended to act as a baseline to ensure that employers compensate their workers fairly for their hard work by providing a wage that can cover basic living expenses. During its 85-year history, the minimum wage has been increased on average every three years — but there have been only three adjustments in the last quarter century. Since the early 1980s, wages around the country have stagnated even as worker productivity has increased substantially. In our current economy, $7.25 an hour can’t cover basic living expenses. In order to make rent for a one-bedroom apartment, an Oklahoman would have to make at least $14.32 an hour.
Concerns about how raising the minimum wage will impact small business owners has hindered support for providing relief to hard working Oklahomans. While large employers like Taco Bell and Walmart might be able to absorb the costs of a higher minimum wage, some policymakers worry small business owners with thinner profit margins won’t be able to absorb the increase in labor costs. However, research has found that small businesses can absorb wage increases and reap economic benefits. It also shows that a higher minimum wage doesn’t lead to large rises in unemployment. In fact, a higher minimum wage makes it easier to recruit and retain employees, increases productivity, and reduces worker turnover. While some employers have raised their wages above $15 an hour, far too many Oklahomans still make less than a livable wage, highlighting the importance of passing legislation that can give Oklahoma’s hard working families a much needed raise.
Raising the minimum wage helps employers retain their workers
One of the biggest issues facing low-wage industries now isn’t a lack of people willing to work, but rather a lack of good paying jobs. A worker trying to support their family will seek better opportunities to make ends meet, leading to high worker turnover. It’s costly for businesses to constantly lose and re-hire workers. For example, it can cost a business more than $1,200 to train one new employee, and that’s not including time and money spent recruiting for the position. High employee turnover also leads to decreased productivity. If a business has to devote resources to hiring employees, and then training those employees, it is not operating at normal capacity.
A higher minimum wage can help mitigate these expenditures. When workers have good paying jobs, they will stay in their positions. In 2021, as businesses returned to normal operations following the worst of the pandemic, many struggled to find employees at pre-pandemic wages. Businesses offering higher starting wages, however, had little to no problem hiring workers. Additionally, these workers stayed in their positions, which reduced turnover. States that guarantee a higher minimum wage for leisure and hospitality industries, meaning employees in businesses like hotels and restaurants, found that their sectors recovered faster coming out of the pandemic.
A higher minimum wage directly supports local economies
Workers employed in small businesses live in their local communities and hence spend locally. When a worker is paid a living wage, it means that they aren’t struggling to make ends meet and have more spendable income. So when workers can spend more of their income in local stores and restaurants, they are generating demand that can cover the cost of paying employees a higher wage. The Small Business Administration estimates that for every $100 spent in a small business, about $68 stay within the local economy. If a customer spent the same amount in a large business, only $48 would stay in the community. Furthermore, a study by the Federal Reserve Bank of Chicago found that raising the pay of minimum wage workers by just one dollar an hour can generate more than $2,000 in consumer spending in a year. There are a myriad of positive effects when money is spent locally; more money circulating in our communities creates jobs, sustains the economy, and bolsters tax revenue.
Oklahomans need a higher minimum wage to meet the challenges of inflation
Beyond boosting the economy and small businesses, raising the minimum wage is vital for helping hard working Oklahomans. Currently, 1 in 3 Oklahomans make less than a living wage, meaning that many of our friends and neighbors are struggling to make ends meet. Raising the minimum wage would have significant positive effects on our state. When the minimum wage increases, Oklahomans at the bottom of the wage ladder see their wages increase, helping those most in need.
Raising the minimum wage would be a good first step to reduce poverty and help stabilize families. A higher minimum wage would significantly reduce poverty, particularly for women and for communities of color that disproportionately work in low-wage jobs due to historic and systemic racism. Oklahoma’s poverty rate is the 8th highest in the nation meaning many Oklahoma families are struggling to pay bills and put food on the table. Additionally, 1 in 5 children in Oklahoma are experiencing poverty, which can negatively affect their educational and future employment opportunities.
Raising the minimum wage would put working families and small businesses first
Oklahoma workers are the drivers of the economy, but many Oklahomans face increasing trouble meeting their basic needs, including rent, groceries, and utilities. However, our lawmakers can raise the minimum wage and provide relief to hard working Oklahomans. As we’ve discussed, a livable wage not only gives workers security, stability, and the freedom to thrive, but it also helps small businesses, leading to reduced employee turnover and increased demand. Small businesses depend on their workers; what is good for workers is good for business.