Many cities and states are raising their minimum wage January 1, and a tax policy analyst says that economic decision is best left up to them.
Some state and local governments tie their minimum wage to inflation, and others have approved measures or allowed for voter referendums that approved wage increases.
The highest minimum wage hikes will occur in California and in Washington state cities.
Meanwhile, the largest statewide percentage increase will take place in New Mexico, where the minimum wage will rise from $7.50 to $9 an hour starting Wednesday.
While the argument for raising wages is to help workers make ends meet, Adam Michel of The Heritage Foundation says people also need to consider small-business owners who sign the paychecks.
"In New Mexico, it's a 20-percent increase," says Michel says. "That is a huge, huge difference for that small-business owner who is paying workers."
As a result, Michel says small-business owners have a couple choices: reduce hours or lay people off.
“That's the decision they're forced to make,” he warns, “and that's what I suspect we'll be seeing in the new year unfortunately."
In addition to salaries, employers are responsible for taking care of a payroll tax, health insurance costs, and unemployment insurance.
"They ultimately have to cover liability expenses and any other benefits they offer," adds Michel.
Earlier this year, the Democratic-controlled U.S. House approved a bill raising the federal minimum wage from $7.25 an hour to $15 an hour. It never got through the Republican-led Senate.
"The fact that the states are doing it is the way our system is designed,” Michel advises, “and states should be able to experiment with good and bad policy.”
That is a much better policy, he adds, than a one-size-fits-all mandate from the federal government that affects all 50 states.