The Seattle company that has set a $70k per year minimum wage for employees has fallen on hard times. It seems that in a real world economic system some employees work harder than others and expect to be rewarded for hard work. They vote with their feet when they feel unfairly denied their share of the salary pie.
Another way of analyzing the problem is to consider poor performing employees as system losses. When a system has more losses, it runs down more quickly.
One of the amenities that attracts well-to-do folks to San Francisco are the small businesses such as Comix Experience, a well-regarded comic book and graphic novel store. Unless it can quickly develop a new revenue stream, the store is headed out of business because it can’t afford to pay its employees San Francisco’s new minimum wage of $12.25 an hour. (It will rise to 15 bucks an hour by 2018.) Ian Tuttle writes about the store owner’s efforts to save his business at NRO.
Hibbs is not inclined to circumvent the market: “Despite being a progressive living in San Francisco, I do believe in capitalism. I’d like to have the market solve this problem.” That applies not just to his plight, but to the question of the minimum wage: “We’re for a living wage, for a minimum wage, in principle. . . . But I think any law that doesn’t look at whether people can pay may not be the best way to go.”
Read the whole thing.
Even in San Francisco, the Laws of Thermodynamics wind up superseding Blue State policy.
I think so, Brain … but can an undertaker qualify for a cost-of-living increase?
Campus Reform reports that Michigan’s new state minimum wage will pressure state universities to hire fewer students or cut their work hours.
UPDATE—As I’ve noted before, increasing the minimum wage effectively outlaws jobs for workers whose skills are of marginal value.
People are often surprised by the unintended consequences of their actions. For example, it was forest management policy to aggressively put out wildfires for many years. That resulted in forests full of quick-burning fuel in the understory—and spectacular, devastating forest fires.
The government’s attempts to manage the economy have been no better. The more it has fiddled, the worse things have become. Now, the Brookings Institution is reporting an across the board decline in business dynamism around the country.
The Blue State Model suggests responding with more government intrusion into the economy. States such as Maryland are doing things such as raising their minimum wage above the national level. The unintended consequence will likely be that marginally skilled workers will be priced out of the legal job market to become more of a drag on a state budget starved because of reduced economic growth.
DaTechGuy suggests that the conservatives in the Blue States should call the Left’s bluff and let them pass such ill-conceived laws. He suggests that the result would be to drive economic and population growth to the Red State, increasing their clout at the national level. It’s a strategy not unlike letting a drunk keep going till he hits bottom.
A quick show of hands, please … how many of you have ever worked for 70 cents an hour? Not very many. That’s what I made at my first job as a high school student shelving books in a university library. The minimum wage back then was $1 an hour, but as a student trainee all I got was 70 cents.
By the time I got my next paying job, the minimum wage was up to a buck-and-a-quarter, but I got $2 an hour. That was not because of any generosity on the part of my employer. It was because I had a First-Class Commercial Radiotelephone Operator’s License from the FCC and could legally operate the transmitter at the radio station that hired me.
I’ve never had a minimum wage job. Since that second job, I’ve been overqualified, but for that first job, I was underqualified. Indeed, if the library had had to pay me more that I was worth, I never would have had that first job. I’d have been priced out of the market.
There’s another way to look at the minimum wage. Declaring that there is a minimum price which must be paid for labor has the effect of outlawing labor not worth that much. That can have two effects. One is to keep more low-skill persons who want to work unemployed. The other is to force more workers into the off-the-books economy. Neither strikes me as a good idea.