On April 30, 2014, the U.S. Senate failed to pass a measure(S.2223) that would have increased the federal minimum wage from$7.25 to $10.10 per hour by 2016, at which time it would bepermanently indexed to inflation.

One of the most vocal organizations opposing the bill was theNational Federation of Independent Business (NFIB), the nation'sleading small business advocacy organization.

In her testimony to Congress on April 29, Susan Eckerly, seniorvice president, public policy, for the NFIB, noted, "Like mostgovernment mandates on business, raising the minimum wage will havea deep and disproportionate impact on the small business sector,because small businesses are the least able to absorb such dramaticincreases in their labor costs. The small business sector hashistorically created two-thirds of net new private jobs in the U.S.economy, but has failed to recover in recent years because of aseries of policies that increase the burden on small businessowners - increases in healthcare costs, higher taxes, more costlyregulations, and now the minimum wage increase proposal."

When debates occur over minimum wage, one of the first figuresmentioned is the percentage of workers who currently earn theminimum wage. Those who support minimum wage increases point outthat, since workers currently making minimum wage represent such asmall percentage of the total workforce, such increases won't havemuch financial impact on employers - except, of course, those forwhom the majority of the workforce is composed of minimum wageworkers, such as restaurant, hospitality and retail.

The percentage of workers making minimum wage is, indeed, small.According to the Bureau of Labor Statistics, only 1.532 millionhourly workers earned the federal minimum wage of $7.25 per hourlast year, and nearly 1.8 million more earned less than thatbecause of falling under certain exceptions (tipped employees,full-time students, certain disabled workers, etc.).

"That group represents 4.3 percent of the nation's 75.9 millionhourly-paid workers and 2.6 percent of all wage and salaryworkers," said Drew DeSilver, a senior writer at the Pew ResearchCenter. "In 1979, when the BLS began regularly studying minimumwage workers, they represented 13.4 percent of hourly workers and7.9 percent of all wage and salary workers."

So, why are so many businesses that don't hire a largepercentage of minimum wage workers opposed to minimum wageincreases? It's because of the "ripple effect."

That is, increasing the minimum wage forces employers to raisewages for those who, at very least, are making just above minimumwage. As noted in a report titled, "The 'Ripple Effect' of aMinimum Wage Increase on American Workers," published by TheHamilton Project, "Although relatively few workers report wagesexactly equal to or below the minimum wage, a much larger share ofworkers in the United States earns wages near the minimum wage."The report continued, "Considering that near-minimum-wage workerswould also be affected (by an increase in the minimum wage), wefind that an increase could raise the wages of up to 35 millionworkers - that's 29.4 percent of the workforce." That is, accordingto the report, "An increase in the minimum wage tends to have a'ripple effect' on other workers earning wages near that threshold.This ripple effect occurs when a raise in the minimum wageincreases the wage received by workers earning slightly above theminimum wage."

However, forced wage increases rarely stop at that level. Infact, such increases may end up being required for all employees ina company. "When there is a minimum wage increase, some smallbusiness owners will raise the pay for most, if not all, hourlyworkers in order to preserve their wage structure and retainquality employees," reported an article ("Minimum wage hike couldmean a raise for all") published by CNN Money in January 2014.

For example, if the minimum wage is $7.25 an hour and is thenraised to $10.10 an hour (as was proposed by President Obama), itdoesn't only affect those employees currently making $7.25 an hour.Logic dictates that employees currently earning $10 an hour aregoing to demand $12.50 an hour, those making $12.50 are going todemand $15, those making $15 are going to demand $20, and so on,all the way up the ladder. In fact, many manufacturing executiveshave noted that, as the wages of their higher-paid manufacturingemployees have continued to rise, they have been forced to closetheir domestic factories and send the work overseas, where wagesare lower. And why do domestic manufacturing employees continue todemand pay increases? Because, as just noted, when workers belowthem continue to receive pay increases (as originally triggered byminimum wage increases), common sense dictates that the higher-paidworkers will also insist on pay increases.

In sum, any time the minimum wage increases, most businesses areforced to raise everyone's pay, and doing so is particularlydifficult on small businesses. "The minimum wage directly affectssmall businesses, because a large amount of their earnings godirectly to pay for operating expenses, such as equipment,supplies, property costs, inventory, and employee wages andbenefits," said NFIB's Eckerly in her Congressional testimony."Increasing labor costs does not incentivize growth or hiring -they make it nearly impossible."