One argument against raising the minimum wage is based on the claim that doing so would hurt small businesses. This argument has some merit, at least for small businesses with narrow profit margins or low income. While companies like Amazon could increase wages while still making massive profits for upper management and shareholders, a small business that is barely making a profit could be hard pressed to increase wages.

 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 labor and has expenses of about $5 an hour, so Larry makes a profit of $5 for every hour an employee works. He also draws a salary for his work running the business and working on lawns and this is worked in the billing on top of the $20 per hour charged for labor.

But if the minimum wage were increased to $15 an hour, then Larry would make no profit unless he cut expenses or charged more. Charging more, some would argue, could make him lose customers which would lead to fewer hours of work for his employees. This could cause a loss of income or force him to fire people.

It could be countered that if Larry’s business breaks even while Larry is earning a wage for his own labor, then everything is good. Larry and his workers seem to be 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 cost of operating the business exceeded what customers would pay, then it can be claimed that the increase in wages hurt the business and employees. This is the sort of scenario used in making the small business argument against minimum wage. The reasoning is that because of the harms of increasing wages, they should not be increased.

But it must be noted operating costs (and such) are also a factor. In the lawn care example, if gas and equipment costs were lower, the lawn care business would have more income.  But it is usually not argued that these costs should be kept low by the government to aid small businesses and the burden of keeping small businesses profitable is usually put on the employees. One could argue that the state keeping operating costs low would hurt other businesses and thus hurt other employees, but this is a choice about who is harmed and how. Increasing what the customers pay would also shift the harm, which is also a choice. But one would need to sort out the impact of increasing prices in terms of how it would impact available hours and jobs. Interestingly, those who argue against minimum wage tend to 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 be wrong. Otherwise, it would be evident that the argument has nothing to do with protecting employees and everything to do with protecting profit. An honest argument from such folk would be refreshing, which would be that wages should not be increased because owners would make less profit.

It is also often argued that the increase in wages would hurt small businesses because larger companies can afford to pay these wages while still being profitable. A reply is that if this is true, then small business could have an exception if they prove they would be unfairly harmed.

A second reply is that those who argue against increasing the minimum wage on this ground would also need to argue 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 just does not want wages increased. At third reply is the harsh free market reply: if small businesses cannot compete, then they will go out of business just as they would if they cannot compete in other ways.

A final response to the small business argument is to point out that the argument can also be seen as making the case 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 me 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 harm that might be caused to employees.