Multiple choice

Directions: For this question, select the best of the answer choices given.

Small-business groups are lobbying to defeat proposed federal legislation that would substantially raise the federal minimum wage. This opposition is surprising since the legislation they oppose would, for the first time, exempt all small businesses from paying any minimum wage. Which of the following, if true, would best explain the opposition of small-business groups to the proposed legislation?

  1. Under the current federal minimum-wage law, most small businesses are required to pay no less than the minimum wage to their employees.

  2. In order to attract workers, small companies must match the wages offered by their larger competitors, and these competitors would not be exempt under the proposed laws.

  3. The exact number of companies that are currently required to pay no less than the minimum wage but that would be exempt under the proposed laws is unknown.

  4. Some states have set their own minimum wages—in some cases, quite a bit above the level of the minimum wage mandated by current federal law—for certain key industries.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The puzzle is why small businesses would oppose legislation that exempts them. Option B resolves this: small businesses must match wages offered by larger competitors to attract workers, and larger competitors wouldn't be exempt from the minimum wage increase. This would force small businesses to raise wages anyway to remain competitive, while gaining no benefit from the exemption. Their opposition makes sense as they'd face increased labor costs without any regulatory relief.

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