Target can afford to raise its minimum wage, but small businesses cannot

In 2017, Target announced that it would raise its minimum wage to $15 an hour by the end of 2020. But in light of current events, the store has expedited the process and will start paying the higher wage beginning July 5.

But while Target is raising its minimum wage, small businesses are urging states to postpone their scheduled minimum wage raises to a later time. To policymakers, this might send a mixed message and imply that small businesses are just trying to take advantage of the pandemic in order to avoid paying workers their dues.

But does Target raising its minimum wage invalidate the concerns that small businesses have when it comes to the minimum wage?

Certainly not. Target is a big company, and during the pandemic, it did not face significant disruptions as most small businesses did. So, Tagert is on a better financial ground, and it can afford to pay its employees $15 an hour. Small businesses, on the other hand, have been upended by the coronavirus and related government-mandated restrictions.

Moreover, small businesses operate on razor-thin profit margins. So, raising the minimum wage hurts them disproportionately, as research has shown. So, while imposing a $15 minimum wage — as some people like Bernie Sanders have suggested — may not affect Target, it will hurt small businesses as they try to recover.

Small businesses are not target

Businesses are not charities. Businesses want to hire people that would produce more output than they cost — in wages and other things. A business cannot survive if its workers are producing less than they are worth. Such a business would, for one, not make enough money to pay its workers. Secondly, it would not be profitable. And no one wants to stay in a business that is not profitable.

Small businesses have been decimated by the lockdowns. Establishments like restaurants are facing lower revenue levels and will continue to do for the foreseeable future.

Requiring such businesses to pay their workers $15 an hour — for workers that may not be worth that much — would be the same as asking some of them to go out of business. In the end, this will not only hurt those businesses but low-skilled workers who will find themselves out of jobs and unable to find one.

Small businesses are not Target, so they should not be subject to the same policies as Target. A one-size-fits-all $15 minimum wage is bad for businesses, but it would especially be more damaging to small businesses as they come out of the crisis.