As a small business owner, just the thought of a higher minimum wage could send you into a panic. After all, that money has to come from somewhere, right?

On the other hand, you value your employees, and you know that they work hard to earn their keep. The fact is that a higher minimum wage has its advantages and disadvantages – depending on who you ask. Here are a few minimum wage pros and cons that you may not have considered in your business.

The Pros of Raising the Minimum Wage

A larger potential talent pool As minimum wages increase, jobs tend to become more attractive to seekers. You may find that a higher minimum wage attracts better qualified, more experienced workers. If so, your staff could be more skilled and more reliable, resulting in improved performance – which will positively impact your bottom line. Moreover, the increased talent level of your staff could also mean that you require fewer workers.

business owner evaluating pros and cons of minimum wage

Lower employee turnover A happy employee is less likely to look for other employment opportunities than an unhappy one. Multiple studies have been linked to improved employee productivity and decreased turnover as a result of minimum wage ordinance.

Increased productivity and customer satisfaction With better-qualified employees who are happier with their jobs, small businesses also benefit from increased productivity and customer satisfaction. Again, this minimum wage pro translates into an advantage that impacts your bottom line.

Economic stimulus Minimum wage workers will have more money to spend with a higher minimum wage and that money will likely be spent. This in turn, could lead to increased sales.

SEE ALSO: How to Hire and Keep the Best Employees for Your Business


The Cons of Raising the Minimum Wage

While the advantages paint a rosy picture, there are a few potential disadvantages or raising the minimum wage including the following:

Other wages may have to be increased If the minimum wage increases substantially, workers who previously earned above the minimum wage may demand a higher rate.

money on a table

Fewer financial resources for payroll With an increase in the minimum wage, you may not be able to afford to promote an employee at a higher rate or hire additional employees. You may also need to scale back on employee benefits to account for your higher payroll costs.

Increased competition for minimum wage jobs With a higher minimum wage, competition will likely intensify with overqualified applicants competing with teenagers and younger, inexperienced applicants. While your small business can certainly benefit from this shift, younger workers could miss out on the opportunity to acquire lifelong skills in an entry-level job.

Business owners may have to take on more work A minimum wage increase will cost your business money before some of the less tangible benefits – such as improved productivity and reduced turnover – ultimately kick in. In the meantime, you may need to take on more work to offset the initial payroll costs. While pitching in on the front lines is noble in a pinch, it takes you away from more important and strategic tasks designed to grow your business. In addition to taking on more work, potentially at the expense of your business’s long-term growth, you may also need to reduce your financial investments in the business.


If your business pays minimum wage, an increase will immediately impact your business, but that impact has its pros and cons. How your business will be affected depends on your approach as well as the employees you hire and retain. While you don’t have much of a say in whether or not the minimum wage increases, now is a good time to re-evaluate your long-term human resources strategy and reevaluate your advantages and disadvantages.

About the Author

Paul Nugent is a small business advocate, and Head of Marketing at ShopKeep point of sale’s UK headquarters. Paul uses his background in the startup space, along with his POS system expertise, to allow small business owners to make informed decisions within their specific budgets.