Businesses Benefit From Bigger Paychecks

When I began exercising regularly, I had a decision to make. Was I going to keep buying inexpensive sneakers and suffer through foot pain and high-cost medical care, or invest in a more expensive shoe that protects my feet and last longer?  After wasting a lot of time and money on low-cost shoes, I finally got wise and chose the latter.  Albeit small in comparison, my dilemma is similar to a more significant issue that many businesses face when considering whether to support raising the minimum wage. 

There are strong arguments against paying higher wages, namely that it will lead to employing fewer workers, decreasing productivity and reducing profits. But the facts show that these are not the typical outcomes to raising wages.  In fact, studies have shown that the benefits of higher wages significantly outweigh any short-term gains from lower hourly rates in states that have raised wages. 

Raising the minimum wage reduces the two biggest drags on business productivity - employee absenteeism and turnover.  Economists have long recognized that better-paid workers are more efficient, more effective, and more productive, contrary to conventional wisdom. [1]

These and other benefits have led thousands of North Carolina to integrate higher wages into their business strategy. Hundreds of businesses in Asheville have become living wage certified through Just Economics, and dozens of businesses in Durham have committed to paying a living wage through the Durham Living Wage Project.

Some of these businesses have found that higher wages has led to a more loyal and experienced staff, resulting in less inventory waste, better products, stronger customer service, and increased customer satisfaction, which all leads to long-term growth.  

It’s not just businesses that benefit from higher wages. Economists have repeatedly found that states that increased their minimum wages have seen better economic performance, lower unemployment, and higher job creation rates compared to states that didn’t raise their wages. [2]   

Raising the minimum wage puts more dollars into the economy, which in turn creates more customers, more sales, and bigger profits. For example, recent studies have indicated that raising the minimum wage to $10 an hour would increase paychecks for North Carolina’s workers by $2 billion a year. That’s $2 billion in increased consumer spending at local businesses, boosting business sales, business profits, and creating more than 5,000 new jobs. [3]  

Before business owners or state officials decide that they can't afford to pay higher wages, they first have to answer whether they can honestly afford not to.