High minimum wage and small-biz job growth

Growth in small-business jobs is greatest in Washington state, which has the highest state minimum wage, and in San Francisco, which has the highest urban minimum wage.

That conclusion is based on the Paychex | IHS Small Business Job Index, a survey of more than 350,000 small-business clients of Paychex, a payroll processing firm, in partnership with IHS, a consulting firm.


U.S. Small Business Jobs Index

The federal minimum wage is $7.25 an hour.  Overall, the United States had a Small Business Job Index of 101.26, which meant that the number of small-business jobs was up 1.26 percent from 2004, when the survey began.

Washington state, with a minimum wage of $9.32 an hour, had a Job Index of 103.51 and San Francisco, with a minimum of $10.74 an hour, had a Job Index of 104.02.

During the past 12 months, small-business jobs increased by 2.2 percent in Washington state.  Seattle’s small-business jobs grew by 2.66 percent, the highest 12-month growth rate among large U.S. cities.  Small-business jobs in San Francisco’s increased 1.13 percent during the same period.

Maybe this job growth is due to a higher minimum wage giving workers more money to spend at local small businesses.  Maybe it is for reasons completely unrelated to minimum wage.

But it provides an answer to the argument of many economists and the Congressional Budget Office that any increase in the minimum wage automatically results in a loss of small-business jobs.


Paychex | IHS Small Business Jobs Index.   Tables of data.

Paychex | IHS Small Business Jobs Index Increases to 101.26 in April.  A press release.

Washington state defies minimum wage logic by Katie Loboso for CNNMoney.  Hat tip to Barry Ritholtz.

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3 Responses to “High minimum wage and small-biz job growth”

  1. theabstractdetail Says:

    Reblogged this on The Abstract Detail.


  2. Atticus C. Says:

    Keep in mind the location. This is probably the most highly concentrated region of start-ups in the world. So the small businesses being measured probably aren’t little mom-and-pop shops you would find in the rest of the country. Rather they are probably seasoned veterans starting their 3rd or 4th tech start up.

    I would like to see the numbers for the rest of the country. For example, a small suburb in Georgia. Little boutique shops and BBQ joints aren’t going to take a $10 minimum wage the way a tech company might.

    I think the federal government should stay out of it for the most part. Wages are probably best set by local Governments and the people who live there. Seattle can raise the minimum wage to $15/hr if they choose while rural Mississippi can keep it at $7/hr.


    • philebersole Says:

      Even though Paychex is headquartered here in Rochester, it is more than a regional firm. It is the second largest payroll processing firm in the USA, and its founder and CEO, Tom Golisano, is on the Forbes’ billionaires list.

      As you can see from the data, Paychex has multiple clients in every state in the union and every major U.S. metro area.

      Paychex is a great entrepreneurial success story. Golisano worked for a payroll processing firm called (as I best recall) Electronic Accounting Systems. He had an idea that EAS could add value by processing withholding taxes, but his employer wasn’t interested.

      So he started Paychex and the rest, as they say, is history.




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