Big Minimum Wage Increases Harm Workers, Business

Liberals love to tell us that a government mandate for businesses to significantly increase minimum wages will create prosperity for lower-wage workers.

OK, so let’s face reality: $15 an hour is good for some workers – it represents a wage increase – but it is generally bad for other workers; bad for those who are unemployed and looking for jobs; bad for the restaurant/business owner; bad for business in general; and bad for the economy.

Remember Golden Rule #1: Government imposition of higher wages is an artificial mandate on a natural economic system. It therefore will not work.

And if raising the minimum wage to $15 an hour through legislation is going to create a more prosperous and happier workforce then why not make it $20?

Don’t laugh. $20 is coming. $15 is just a step along the way. It is all part of the socialist/communist plan for a “living wage” or “guaranteed income” that will be set by government mandate.

Here is how the $15 minimum wage is taking effect. CBS News reported:

The legal minimum wage for New York City employers with 11 or more workers rose more than 15 percent on Dec. 31, 2018, to $15 per hour from $13, giving fast-food, retail and other employees a bump in pay. But some New York City restaurant owners say the latest minimum wage hike is forcing them to cut workers’ hours just to stay afloat.

It’s the third rise in the city’s base wage since Dec. 31, 2016, when it went to $11 an hour.

Woah. Stop right there… Look at this number very carefully. It went to $11 an hour at the end of 2016 and now it has increased a whopping 36% in just two years.

Imagine if your rent or mortgage suddenly went from $1,000 a month to $1,360 in just two years. That would be devastating to your budget just as these big minimum wage increases are devastating to millions of business owners.

Here is the solution for wages: While the federal government sets a minimum wage of $7.25 an hour employers should generally be allowed to decide how much to pay their workers.

If an employer wants to pay an unskilled fast-food order-taker or a dishwasher $9 an hour then that is his prerogative. After all, it is his business.

If he cannot find workers at $9 an hour then he will be forced to pay more. But as long as people are willing to work for the wage that the owner is offering then the owner should be left to pay what he wishes.

If a store owner wants to pay a teenager $7.25 an hour to reorganize the stock room in his store, and if a teenager wants to work for that wage to earn some money, then those two private persons should be able to make that transaction without government interference.

But if the wage is $15 an hour then the stock room may well remain dis-organized and the teenager may well remain unemployed; or the unskilled, uneducated order-taker at McDonald’s may find his/her job replaced by a computer touch-screen as we are seeing at fast-food restaurants across the country.

On the other hand, if the employer wants to pay valuable employees $15 or $25 or $35 an hour, or wants to pay his talented manager $50 an hour because the manager does an excellent job and is valuable to the company then that is the employer’s prerogative since the business is his own creation.

Economic Milton Friedman put it correctly, saying, “A minimum-wage law is, in reality, a law that makes it illegal for an employer to hire a person with limited skills.” believes that an employer should be free to pay whatever he wishes. So imagine this hypothetical situation – that a homeless person or a recovering drug addict does not have a work record and is unreliable, but that a garage owner is willing to pay him $5 an hour to keep the shop clean whenever he shows up.

At $5 an hour, and if he shows up 15 hours a week, the homeless person would earn $3,900 per year, versus $0 per year if the minimum wage is $15 an hour. And $3,900 per year is a lot of money to a homeless person who might otherwise have zero job prospects.

This not only gives the homeless person some money but it occupies his time which he might otherwise be wasting sitting around doing nothing.

Interestingly the thriving Trump economy is pushing up wages naturally as businesses compete for scarce labor. recently saw an ad for a convenience store clerk in a tiny town in Vermont for $11.50 an hour. This was not a mandated wage – this is what was needed to attract a clerk in the Trump economy. This would be equal to $15 an hour in a big city like Seattle when you account for cost-of-living differences.

Labor unions and leftists are behind the $15 mandated minimum. That alone is why we should oppose it. US labor unions have gotten artificially high wages for their members for many decades but have ultimately destroyed or thwarted the creation of tens of millions of good-paying jobs.

Unions destroyed my hometown in Massachusetts by driving out the big employer General Electric with decades of strikes, violence and outrageous wage demands. In other words the union members certainly got great wages and benefits, but future generations have gotten nothing. CBS News continues:

The latest increase is part of a plan that phases in minimum wage hikes across New York state, with amounts and effective dates varying by region and industry. It’s not just a New York phenomenon, however: Minimum wages rose in 20 states with the new year, forcing businesses across the country to grapple with higher payrolls — and compete for workers with giants like Amazon that are already offering $15 an hour.

Jon Bloostein operates six New York City restaurants that employ between 50 and 110 people each. The owner of Heartland Brewery and Houston Hall, Bloostein said the effect of the higher minimum wage on payroll across locations represents “an immense cost” to his business.

“We lost control of our largest controllable expense,” he told CBS MoneyWatch. “So in order to live with that and stay in business, we’re cutting hours.”

Bloostein said he has scaled back on employee hours and no longer uses hosts and hostesses during lunch on light traffic days. Customers instead are greeted with a sign that reads, “Kindly select a table.” He also staggers employees’ start times. “These fewer hours add up to a lot of money in restaurants,” he said.

Bloostein said he has increased menu prices, too. “So as a result [of the minimum wage hike], it will cost more to dine out,” he said. “It’s not great for labor, it’s not great for the people who invest in or own restaurants, and it’s not great for the public.”

OK, let’s analyze this. Let us remember Golden Rule #2: Government-mandated minimum wage increases do not “create” wealth for workers. They simply “transfer” wealth from one group of people to another group, as all of socialism does.

To illustrate, here are things that are actually happening in restaurants and other businesses as the minimum wage goes up to $15 an hour. Thus while some workers are benefiting from the higher wage…

*Business owners are often dipping into their own pockets to pay the higher minimum wage. Since many businesses operate on very low margins this can be very difficult, if not fatal, for a business. This $15 minimum is forcing businesses to close all across the country.

*Restaurant owners often eliminate raises and benefits for other workers in order to pay the higher minimum wage. This can cause strife among other workers who think they deserve a raise.

Again, this represents a “transfer” of wealth from other workers to minimum-wage workers. For instance one Seattle restaurant stopped giving its employees free meals to accommodate increasing minimum wages. Many businesses are cancelling or charging employees more for benefits like health insurance.

*If a long-serving employee is earning $15 an hour, and then sees new minimum-wage employees suddenly getting $15, then the long-serving employee is going to feel that he should earn more. This is how government-mandated minimum wage hikes cause upward cost pressures on businesses.

*Businesses/restaurants often raise prices to pay the higher minimum wage. These higher prices are a “wealth transfer” from customers to restaurant workers and it often leads to decreased revenues for the restaurant as customers decide that eating out has become too expensive. In fact it is a double whammy on the restaurant – wages go up as business falls off. noticed this recently. Just a few years ago I remember paying $1.49 for a double cheeseburger at McDonald’s. Recently it was $2.45 due largely to higher minimum wages. So I will buy fewer double cheeseburgers.

*Business owners often cut hours for all workers to save money to pay the higher minimum, or they fire bottom-rung workers while asking existing workers to do more, like asking waiters to clear and then set up their own tables. This leads to a heavier work load for existing workers.

*Restaurant owners often decline to hire new workers as they become increasingly expensive to employ. This hurts people who are looking for jobs, particularly low-skilled workers who are supposed to benefit from the higher minimum wage in the first place.

The annual wage difference between hiring a dishwasher at $10 an hour and at $15 is roughly $10,000 a year. That is a big chunk of money for a small business. If you add in the increased cost for Social Security and Medicare, the difference is another $765 per year.

*Business owners are refraining from expanding in areas where minimum wages are too artificially high. This thwarts the creation of new jobs and hurts job seekers in those areas. For instance even a huge corporation like Boeing moved one of its main production plants from highly-unionized Seattle to non-union South Carolina to save on artificially-high union labor costs.

*Businesses are replacing workers with automation. Many fast-food restaurants, for instance, are installing computer touch-screen ordering and robot hamburger cookers to replace human workers as minimum wages go up.

So Golden Rule #3 says: It is better for a worker to be employed at $10 an hour than unemployed at $15.

*The $15 minimum is a form of government-imposed unionization, i.e., government and unions work together to set wages without officially unionizing the workers.

In other words these big minimum wage hikes are not a ‘free lunch’; they actually create many more problems than they solve. CBS News continued:

A New York City Hospitality Alliance survey of 574 restaurants showed that 75 percent of full-service restaurants reported plans to reduce employee hours this year in response to the latest mandated wage increase. Another 47 percent said they would eliminate jobs in 2019. Eighty-seven percent of respondents also said they would increase menu prices this year.

These types of cost-cutting moves coincide with a U.S. Labor Department report released last Friday showing full-service restaurants in December raised prices the most since 2011, to cover soaring labor and food costs.

“The money has to come from somewhere, and we found that unfortunately, as a result, businesses are making some really tough decisions which don’t only impact them, but have a negative impact on their workers as well as their diners, too,” said Andrew Rigie, executive director of the New York City Hospitality Alliance, which represents restaurants and nightlife venues throughout the five boroughs.

But liberals do not see it this way. Liberals think that all business owners have lots of cash under their mattresses to pay the higher wages. Unions treat businesses like piggy banks. This is why US businesses are thriving in the non-union Southern states and withering in the North where unions are or were strong.

This is also one of the reasons that highly-unionized Europe has such stagnant economies. CBS News continues:

But shaving workers’ hours and killing jobs limits restaurateurs’ ability to offer employees opportunities for growth and development. It also can kill owners hopes of offering a fine-dining experience that delivers both good food and good service.

Susannah Koteen, who opened Lido Restaurant in Harlem in 2011, said she has already started combining jobs to reduce workers’ hours. She relies on servers to bus their own tables, eliminating one of the lowest-paying customer-facing jobs.

She explained her rationale: “A server can bus their own table, but you can’t ask a busboy to open a bottle of wine and talk about what it can be paired with,” she said.

Koteen said she’s loath to cut these kinds of positions in a community she cares about and from which she has in the past promoted low-wage workers to management positions. “Our current general manager started as a busser the day we opened. English is not his first language, he has his GED. He is smart, hardworking and cares about customer service.”

She also worries that the wage mandate will discourage operators and change the restaurant landscape in New York City.

“If you make it impossible for people to operate, they have to close or take drastic measures or really cut people back. At some point people aren’t going to be opening because you have to look at the bottom line,” she said.

This entry was posted in Current Events (More than 1,500 previous editorials!) and tagged , , , , , , , , , . Bookmark the permalink.