A Tale of Two Businesses: What a Federal Minimum-Wage Hike Would Mean

One of the most divisive proposals President Obama announced Tuesday during his State of the Union speech was the call for a hike in the federal minimum wage, from $7.25 to $9 an hour.

Obama said this move would allow workers earning minimum wage across the country to live above the poverty line, adding that 19 states have already bumped wages above the federal minimum.

“Even with the tax relief we've put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That's wrong,” Obama said. “Tonight, let's declare that, in the wealthiest nation on Earth, no one who works full time should have to live in poverty.”

But U.S. small-business owners were divided over the agenda, some saying instead of helping struggling workers make ends meet, it would cause layoffs and stifle growth.

One such business owner is Marco Lentini, president of Gia Pronto in Philadelphia. Lentini had the opportunity to represent U.S. businesses and introduce President Obama when he announced his Economic Stimulus Act, and felt the president was interested and engaged in helping the mom and pops. Since then, Lentini said Obama has become increasingly out of touch.

“He is crazy to do this raise -- salaries are probably the biggest cost component of small businesses,” Lentini said. “Raising the minimum wage in a struggling economic environment is a terrible idea.”

Doing so would cause business owners like Lentini, who has 60 employees and pays above the minimum wage of $7.25 but below the $9 Obama is calling for, to raise consumer prices. Even doing this wouldn’t make up for the payroll costs this hike would impose on businesses, Lentini said.

“If I am a Starbucks or Applebee’s, I can put pressure on my customers with prices,” he said. “But at a small or family business, we don’t have that buying power.”

Not all small-business owners are frustrated over the president’s push for higher minimum wages. Joseph Palumbo, co-owner of Camelot Specialty Limos, Inc., in Farmingdale, N.Y., said he agrees with the president’s push. He pays all of his 42 workers at least $10 an hour, he said, and wouldn’t even consider dropping it lower.

“What I think is wrong with the [current federal] minimum wage is that people aren’t earning enough to survive in this city or in the state,” Palumbo said. “You are forcing them to look at other ways to not be responsible -- that person making $7 an hour is not making enough money to feed his family.”

Palumbo added that he is a Republican, and does not advocate for Obama in most cases. The issue of fair wages, however, should be nonpartisan.

“We need to look past politics and think about what’s best for our country and our city,” Palumbo said. “You don’t want to be the guy at the table who always picks up the bill, and that is what we are becoming. That is why this country is broke. We are creating people who want to go on unemployment.”