Minimum Wage Increase Impacting Small Businesses

January 3, 2007 - Posted at 6:01 p.m. CST

KENNETT, MO -- About 250,000 Missourians are getting a raise.  Wednesday, the minimum wage goes up from $5.15 to $6.50 an hour.  It may sound like big bucks for some, but small businesses are feeling the crunch.

"If we weren't a non profit organization, we could not operate and survive, it's just that simple," said Willie H. Johnson, Sr., CEO of Lighthouse Kids College.

The Lighthouse Kids College in Kennett is a daycare facility with a special focus on low and dependent families.  75% of their enrollees are from families at or below the poverty level.

"The parents who had children who needed to be in an educational program and couldn't afford it, these children were left behind. So we developed this program to include those children," said Johnson.

The center is licensed for 60 children, ages 2-13 and currently has seven employees. The new minimum wage increase in Missouri serves as kind of a double edge sword. Many of the parents of the children here will experience the financial benefits of the increase, but Johnson says the center may have to cut two positions to serve the financial hardships.

"We will have to cut back some hours on our employees that are now getting 30 hours," said Johnson, "We have to cut that back to 25 just to offset and we will have to use some of our church members for volunteers."

But Johnson believes the ripple effect won't stop there.

"Some of these parents who are now on the disproportionate rate will probably be dropped and their children will probably have to withdraw from the school because their income now is going to be above the state merit where they can qualify for free child care," said Johnson, "We won't close our program. If we have to provide free child care for some of the parents who are at the low end to provide them the service that they need to continue their children's education, we will."

Missouri is now one of 29 states that require employers to pay more than the federal minimum wage of $5.15 an hour.  18 states have similar increases taking effect this year.