All the arguments that have been presented for increasing the minimum wage to 15 bucks an hour rely on claims that a lesser wage does not provided enough money to a worker. Such claims are based in the use of arithmetic to compute the worker’s financial status and implicitly endorse the proposition that there is such a thing as a “right answer.” However, it now received educational theory that the very idea of a “right answer” is a racist concept. Thus, in order to advance minorities and suppress white supremacy, it is vital that we not only defeat the Fight for Fifteen but also must also repeal the existing minimum wage laws that have been used as tools of oppression for decades.
Rev. William Barber has a post over at In These Times about The Fight for a $15 Minimum Wage Is a Fight for Racial Justice. He quotes a loose translation of the beginning of the 10th chapter of Isaiah in support of his argument—
Woe unto those who legislate evil and rob the poor of their rights, who make women and children their prey.
I agree with Rev. Barber that those of us who are better off have an obligation to treat the poor justly and to compassionately care for widows and the fatherless. However, I believe the minimum wage increase he supports will hurt rather than help the poor. Indeed, passing such a law will be legislating an evil.
The general effect of increasing the minimum wage is to price workers with marginal skills out of the labor market. Businesses don’t have bottomless funds from which they pay wages. They can only extract so much revenue from their customers, and that money must be divided among paying for inventory, rent, wages, and other expenses. A minimum wage bill doesn’t make expenses like rent disappear, so a business only has so much it can divide among its workers for payroll. When the law artificially increases each worker’s pay, simple arithmetic shows that fewer workers can be paid before the money is gone. Business that survive will keep their best employees and fire marginal workers. Business that grow will hire fewer workers.
Not every worker who loses his job because of a minimum wage increase will remain unemployed. Some will find work off-the-books in the informal economy, but increasing the minimum wage invariably increase unemployment among our poorest citizens.
We Americans generally believe that everyone has a right to work to support himself and family. Is it just to pass a law artificially pricing poor workers out of the labor market? I don’t think so.
There’s a push to raise the minimum wage to 15 bucks an hour. Of course, the actual cost to an employer will be greater. For example, the employer’s share of the FICA tax on $15 is 93 cents, and there will be other additional expenses. But for the this exercise, let’s use $15.93 an hour as the employer’s cost. What will happen to a marginally skilled employee who provides less than $15.93 of value to the business and whose presence is a net loss to the employer?
Let’s not always see the same hands.
The real effect of a minimum wage is not to make it illegal to pay workers less than some arbitrary wage. Instead, it outlaws the participation of marginally skilled workers in the on-the-books economy, forcing them to work in the shadow economy.
BTW, some politicians see that result as a feature rather than a bug.
Reason has a post up about how the $15/hour minimum wage in New York City is having an adverse effect on restaurants and restaurant employees who are seeing their hours cut or are being laid off. That’s the Real World result of trying to legislate the economic value of any person’s labor. OTOH, some folks believe a “living” minimum wage is like the rest of socialism; we just haven’t done it right yet.
Anthony Advincula, a spokesman for the ROC [Restaurant Opportunities Center], has argued that such negative effects need not happen in tandem with the city-mandated wage hikes. “Increasing to $15 would reduce income inequality, and the number of individuals living in poverty now is ridiculously high,” he told The Wall Street Journal. “This is not just a business issue, this is a race, gender, pay-equality issue.” But if New York City is any example, the measures pushed by Advincula will only serve to make those issues worse.
Let them eat … um … home cooking.
I think so, Brain … but if the minimum wage increase goes through, they’ll have to start replacing clerks with those automated kiosks at the unemployment office.
The coming increase in California’s minimum wage to $15/hour will likely lead to the UC Berkeley laying off 500 low-paid workers. However, the university will be able to save the job an administrator for every five or six janitors or food service worker it fires.
The President claimed in his State of the Union speech that the national economy is doing well. That may seem true inside the Beltway, but out here in the Real World, it doesn’t look so good.
Salena Zito writes that economic discontent is widespread.
The economy is dismal not just in the old Rust Belt but nationwide. On Tuesday, the National Association of Counties released its gold-standard study that shows, six years after the economic expansion began, 93 percent of U.S. counties have failed to fully recover from the devastating contraction they suffered during the recession.
Only 7 percent, or 214 out of 3,069 counties nationwide, recovered by 2015 to their pre-2008 numbers on total employment, economic expansion, home values and unemployment.
Read the whole thing. She suggests that the economic malaise of the Obama economy is one of the key drivers of the populist unrest pushing both the Trump and the Sanders presidential campaigns.
John Hinderacker chimes in, noting that the economic recovery over the last 7 years has been the worst in the past 70, in large part because of government disincentives.
In other words, government welfare programs are crushing America’s economic growth.
He’s posted a staggering chart of federal welfare programs that spend over a terabuck (a trillion dollars) each year. It’ll still be too hard to read after you click to enlarge it.
Meanwhile, back inside the beltway, DC city officials are bent out off shape because their minimum wage hike has caused Walmart to have second thoughts about building more stores in the city.
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.[youtube https://www.youtube.com/watch?v=6vxHkAQRQUQ]
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.
Prof. Jacobson at Legal Insurrection has been following the economic nonsense concerning Senator Elizabeth Warren’s claim that the minimum wage should be $22 an hour.
Let’s do some math.
There are roughy 135 million workers in the U. S. 22 bucks an hour works out to around $45,000 year, which would give a total U. S. payroll of a bit more than $6 trillion. That’s just about equal to the total of all wages and salaries paid in the country last year. In other words, in a struggling economy business would have to drastically reduce their unskilled minimum wage employment in order to have money left over to pay their skilled employees. One consequence of increasing the minimum wage is to outlaw jobs for workers with lower skills, increasing unemployment and slowing economic growth.
… only outlaws will have jobs.
The Minimum Wage Law does not create jobs. Rather, it outlaws jobs that are worth less than some arbitrary wage. When those jobs are outlawed, the market produces several responses.
Some folks give up and go on welfare.
Some low-paid workers continue to work in jobs that would otherwise be legal but are now off the books. That’s illegal, and they become outlaws.
Some turn to crime and become serious outlaws.
Do we really want to raise the Minimum Wage?