Small-business groups are lobbying to defeat

[ankur.srivastava2]

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?
(A) Under the current federal minimum-wage law, most small businesses are required to pay no less than the minimum wage to their employees.
(B) 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.
(C) 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.
(D) 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.
(E) Service companies make up the majority of small businesses and they generally employ more employees per dollar of revenues than do retail or manufacturing businesses.

The ans is B. But what s wrong with C?

On a second look the reason behind B being correct appears to be:
The wage hike will be applicable to Large companies. Hence, more workers will be attracted towards Large companies. And as small companies will struggle to match up with these wages, they will struggle to retain good people.
That is the only thing I can interpret for B to be correct.

Can some one please elaborate and throw some light on this GMATPrep Question?

[RonPurewal]

ok, let's try to simplify this argument a bit:

* small businesses are opposed to the raising of the minimum wage. therefore, it's reasonable to infer that the small businesses would be adversely affected in some way by paying that wage; otherwise they would have no reason to be opposed to it. so we know that small businesses will have a hard time paying this higher minimum wage.

* however, we also know that the higher minimum wage will not actually be legislated for small businesses.

* still, the small businesses are still opposed to the higher minimum wage, even though they don't have to pay it themselves.

taken together, these facts imply that the small businesses figured that the new minimum wage will affect them somehow, even if they are not forced directly by law to pay it.

so, we need to find some way in which the legislated minimum wage will "trickle down" to small businesses, even if small businesses are not required to pay that wage.

(B) 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.

this is the answer that we're looking for -- basically, it states that the overall market requires small businesses to move in lockstep with larger businesses, or else they will simply lose all their potential employees.
in other words, instituting a minimum wage for larger companies creates a de facto minimum wage for smaller businesses -- even if the smaller businesses are not directly required to pay that wage -- because any small business foolish enough to pay lower wages will not be able to find or retain workers.
if this is the case, then the small businesses should react to the new wage (from which they are technically exempt) in exactly the same way that they would react if the wage law were imposed directly upon them.

(C) 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.

we don't care how many businesses are affected by, or opposed to, the law. all we care about is WHY those businesses would be affected by, or opposed to, the law.
so this choice is irrelevant.