What a $15-$20 Federal Minimum Wage Would Mean for Small Businesses and Prices

The federal minimum wage debate isn't just about workers versus employers - it's about complex economic tradeoffs that ripple through entire communities. Here's the unvarnished math on what $15-$20 minimum wages actually mean for different types of businesses and consumers.

The Small Business Reality Check

A small restaurant with 15 employees currently paying $7.25/hour spends about $226,000 annually on minimum wage labor (assuming 2,000 hours per worker). Jumping to $15/hour more than doubles that to $450,000 - an extra $224,000 per year.

For a business with 5-10% profit margins, that's devastating without major changes. They have four options: raise prices, cut hours, automate jobs, or close. Most try all four.

The Price Pass-Through Effect

Studies show 25-100% of minimum wage increases get passed to consumers as higher prices, depending on the industry. Fast food sees the highest pass-through rates because customers are price-sensitive but still need to eat.

That $12 restaurant meal becomes $14-$15. The $8 car wash becomes $10. Local services - haircuts, oil changes, dry cleaning - all see price bumps. The minimum wage increase helps workers who keep their jobs, but creates a hidden tax on everyone else.

The Automation Acceleration

Here's the uncomfortable truth: every minimum wage increase makes automation more attractive. When human labor costs $7.25/hour, a $15,000 self-checkout kiosk might not make sense. At $15-$20/hour, it pays for itself in months.

McDonald's didn't install ordering kiosks nationwide because they love technology - they did it because labor costs made machines cheaper than people. Seattle's $15 minimum wage correlates with thousands of restaurant job losses and increased automation.

The Geographic Problem

$15/hour in rural Mississippi (where median income is $35,000) has very different economic impact than $15/hour in San Francisco (where median income is $75,000). A federal minimum wage essentially sets San Francisco wages based on Mississippi's economy, or vice versa.

In lower-cost areas, $15/hour minimum wages can exceed what many small businesses pay experienced workers, creating wage compression and forcing businesses to raise all wages or face talent flight.

The Employment Paradox

Minimum wage increases help workers who keep their jobs and hurt workers who lose them. The debate is really about whether helping some workers is worth potentially eliminating jobs for others.

A 2019 Congressional Budget Office study estimated $15 federal minimum wage would lift 900,000 people out of poverty but eliminate 1.3 million jobs. Both numbers matter.

What Really Happens

In practice, most businesses adapt through a combination of strategies: modest price increases, slight hour reductions, slower hiring, accelerated automation, and improved efficiency. The dramatic job losses opponents predict rarely materialize, but neither do the prosperity gains supporters promise.

The real winners are workers who keep full-time jobs at higher wages. The losers are marginal workers who lose hours or jobs, and consumers who pay higher prices for local services.