Fact Check: Small Businesses, Bigger Paychecks | Voice of San Diego

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Fact Check: Small Businesses, Bigger Paychecks

City Council President Todd Gloria claimed more than 80 percent of small businesses pay their workers above minimum wage.

Statement: “The analysis that we have seen, the studies and research that we’ve seen, is that 80 percent of small businesses already pay better than the minimum wage,” City Council President Todd Gloria said at a June 16 press conference.MostlyTrue

Determination: Mostly True

Analysis: City Council President Todd Gloria and others pushing a minimum wage hike say they want to ensure fair wages for workers – not endanger small businesses.

At a June 16 press conference, Gloria emphasized that few small businesses will be forced to boost worker paychecks if the $11.50 minimum wage proposal passes. After all, he said, research shows 80 percent of them already pay their workers more than the minimum wage.

Small companies make up the bulk of San Diego businesses and employ the majority of private-sector workers here so we decided to pull back the curtain on Gloria’s statement.

A spokeswoman said Gloria was referencing the results of a national survey released this spring by Small Business Majority, a national small business advocacy group.

The nonprofit, which has Democratic Party ties but bills itself as nonpartisan, paid two companies to survey 500 small business owners across the nation this February.

A Small Business Majority spokeswoman said the survey specifically targeted owners of companies that the outside consultants decided were representative of the small business population.

Among the questions asked was whether they paid any of their workers minimum wage.

Eighty-two percent said they paid all their employees more and 18 percent said they paid at least some minimum wage.

All the respondents own companies with 100 or fewer workers, one of a handful of differing definitions for small businesses:

The federal Small Business Administration’s Office of Advocacy generally considers companies that employ fewer than 500 staffers small firms for statistical purposes. The same agency’s Office of Size Standards considers multiple variables for government contracting and other purposes.

Meanwhile, the San Diego Regional Chamber of Commerce’s working definition of a small business is fewer than 50 employees. The city of San Diego’s cutoff is even narrower: businesses with 12 or fewer workers.

The San Diego Workforce Partnership told me in 2012 it usually considers businesses “small” if they have 10 to 100 workers.

The federal government largely categorizes businesses with up to 500 workers small but census data released in 2011 shows just 1.7 percent of California companies the Small Business Administration would define as small businesses employed more than 99 staffers.

This means the Small Business Majority study included responses from at least most of the range of small business sizes in its survey.

San Diego’s small business definition of 12 or fewer workers, however, is much narrower. The vast majority of survey respondents – at least 83 percent – have fewer than 12 workers but it’s not clear which percentage of those companies pay above the minimum wage. The survey only concludes that 82 percent of all small business surveyed pay above that amount.

Then there’s the issue of the industries represented in the survey.

Financial and recreation companies, for example, made up 11 percent and 9 percent of respondents in the Small Business Majority survey, but make up about 4 percent and 2 percent of small businesses with up to 99 workers, according to Census data.

Still, the Small Business Majority study incorporated a broad swath of industries, from restaurants to real estate, and it was the only study I could find that specifically addressed what percentage of small businesses of any size pay above the minimum wage.

Spokespeople for two other leading small business advocacy groups – the right-leaning National Federation of Independent Business and the nonpartisan National Small Business Association – said they weren’t aware of similar research.

Molly Day of NSBA declined to comment on the Small Business Majority survey but said the vast majority of small businesses her group works with pay more than the required hourly wage.

Other studies show larger companies employ far more low-wage workers. A 2012 report by the labor-aligned National Employment Law Project highlighted the nation’s 50 largest low-wage employers, a list that included Walmart, McDonalds and Target.

But Gloria’s statement focused on small businesses. He claimed the research shows 80 percent of businesses already pay workers more than the minimum wage.

That’s mostly true. Small Business Majority appears to be the only group that’s specifically explored the percentage of small companies that pay more than minimum wage, and its survey indeed found 82 percent of a cross-section of small businesses pay their workers more.

There are few crucial nuances, though. For one, the statement is based on a national survey rather than one focused on San Diego or California. That survey focused on companies with up to 100 employees; the federal government uses a broader definition and the city of San Diego, where Gloria’s proposed minimum wage hike would take effect, uses a much narrower one. Furthermore, the business owners who responded to the Small Business Majority survey may not exactly mirror the small business population as a whole.

If you disagree with our determination or analysis, please express your thoughts in the comments section of this blog post. Explain your reasoning.

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