A stock argument against raising the minimum wage is built on the claim doing so would hurt small businesses. This argument has some merit. While companies like Amazon and McDonalds could increase employee wages while still making a massive profit for upper management and shareholders, a small business that is barely making a profit could be hard pressed to increase wages without running at a loss.

 To use an imaginary example, suppose Larry owns Larry’s Lawn Care and pays his workers $10 an hour. He charges his customers $20 an hour for the labor of his employees and the expenses for things like fuel and maintenance equal about $5 an hour. So, Larry makes a profit of $5 for every hour an employee works. He also draws a salary and includes this in the bills.

But if the minimum wage were increased to $15 an hour, then Larry would make no profit unless he cut expenses. If cutting expenses is an option, Larry will need to increase what he charges to make a profit from his business. This increase, some would argue, could cause a loss of business which would lead to fewer hours for employees—thus causing a loss of income or even the firing of some employees.

It could be countered that if Larry’s business is breaking even while Larry is earning a salary for his own labor, then everything is good—Larry and his workers are getting what they deserve within the context of what customers are willing to pay for the services. But if the business was experiencing a loss and could not make full payroll because the wages and the minimum cost of operating the business exceeded what customers would pay, then it could justly be claimed that the increase in wages hurt the business and employees. This is the sort of scenario commonly used in making the small business argument against minimum wage. The reasoning is that because of the alleged harms of increasing the minimum wage, it should not be increased.

But it must also be noted that operating costs (and other expenses) are also a factor that impacts profits. If fuel and equipment costs were lower, the lawn care business would have more income.  But few argue that these costs should be kept low by the government to aid small businesses. As such, the burden of keeping small businesses profitable is usually put on the employees–the lower their wages, the greater the profit. The obvious argument against the state keeping operating costs low is that keeping operating costs low would hurt other businesses and thus (possibly) hurt other employees. But this is still a choice about who is harmed and how they are harmed. Increasing what the customers pay would also shift the harms, which is also a choice.

 Interestingly, those who argue against minimum wage often accept that companies can raise prices to increase profits even when doing so could result in employees losing hours or jobs—in fact, companies are often rewarded financially for firing people. To be consistent, someone who argues that increasing minimum wage is wrong because it would hurt employees by reducing hours or costing jobs must also argue that profitable policies that result in workers losing hours or jobs would also be wrong. Otherwise, it would be clear that their argument really has nothing to do with protecting employees and everything to do with protecting profit. An honest argument of this sort would actually be refreshing: minimum wage should not be increased because owners would make less profit.

It is also often argued that an increase in minimum wage would hurt small businesses because larger companies can afford to pay these wages while still making vast profits. One easy reply is that if this is true, then small business that would be harmed could be an exception to the general increase. This would hardly be unprecedented, since there are already many regulations that are linked to the size of a business.

A second reply is that those who argue against increasing the minimum wage on this ground would also need to accept that small businesses should be protected from larger businesses in other ways. After all, if the minimum wage should not be increased because smaller businesses cannot compete with large businesses, then the state should also see to it that larger businesses do not enjoy other advantages over small businesses. If one is not willing to accept this view, then it is likely that one does not care about small businesses—one is just against increasing the minimum wage.

A third reply is the free market reply: if small businesses cannot compete in this manner, then they will go out of business just as they would if they cannot compete in other ways. While harsh, this is consistent with capitalism as practiced. But embracing this approach would, of course, mean abandoning the small business argument against increasing minimum wage.

A final response to the small business argument is to point out that the argument can be taken to be that minimum wage should not be increased because doing so would decrease the income of small business owners. This seems to assume that the owners are entitled to their profits. But employees can point out that not increasing the minimum wage (even if only to match inflation) reduces their income as inflation reduces the value of their wages. So, if reducing income is wrong, then not increasing the minimum wage to at least account for inflation would be wrong. After all the owners would still be making the same profit they were before (adjusted for inflation). As such, those who oppose increasing the minimum wage to at least account for inflation cannot consistently use the small business argument—unless they are willing to be clear that what they are concerned with is the profits of the owners rather than alleged harms that might arise to employees.