As Expected $15 Minimum Wage Hurting Workers, by Sarah Cowgill

Requiring employers to pay employees more than they’re worth has consequences. Who knew, besides anyone who knows anything about economics? From Sarah Cowgill at libertynation.com:

The move to make flipping burgers and shoehorning fries into a lucrative career has been a national debate pitting hourly workers against the businesses that employ them. Granted, doubling the entry-level wage seems ideal for those struggling to survive. However, as more states and municipalities force the issue through legislation or ballot initiatives, the downside risk becomes increasingly, and painfully, obvious.

It’s a bite that the Big Apple is experiencing firsthand as the minimum wage increased 15% on Jan. 1, and employees who rely on tip wages to eke out a living are salving their dashed hopes of gaining ground because restaurant owners are slashing hours and, in many cases, abolishing hospitality positions altogether.

Well, that didn’t take long at all.

They Mean Well

The idea of using a baseline wage to overcome poverty is a noble, longstanding U.S. tradition, and it needs to die a quick death.

An increase in the minimum wage increases unemployment;  there is no success when raising the mandated minimum price of labor above the productivity of lesser skilled workers.  A recent report by the New York City Hospitality Alliance warns about the loss of wages and jobs.  It interviewed 574 establishments — 324 full-service restaurants and 250 limited-service restaurants — and published the following results:

“76.50% of full service restaurant respondents reduced employee hours, and 36.30% eliminated jobs in 2018, in response to mandated wage increases. 75% of limited service restaurant respondents report that they will reduce employee hours, and 53.10% will eliminate jobs in 2019 as a result of mandated wage increases that took effect on December 31, 2018.”

A swing and a miss.

Meet Joe Bloostein, owner-operator of six New York City restaurants, who employs 50 to 110 service workers in each location and who is now on the defensive to keep the doors open.  As Bloostein admits, “We lost control of our largest controllable expense. So in order to live with that and stay in business, we’re cutting hours.”

And he also raised menu prices and eliminated staff positions. “[It] will cost more to dine out, 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.”

Now patrons are greeted by a sign instead of a hostess, who is out looking for another job.

The Same Old Pandering

In 1987, believe it or not, The New York Times ran a scandalous headline, The Right Minimum Wage: $0.00, and opined:

“Raising the minimum wage by a substantial amount would price working poor people out of the job market. A far better way to help them would be to subsidize their wages or — better yet — help them acquire the skills needed to earn more on their own.”

Skilled labor isn’t a concept the present Democrats in Congress understand, either. In their pandering to appease the increasing vocal socialist demographic, they recently introduced legislation to raise the federal minimum wage to $15 an hour, a desperate political ploy to reinvent themselves as the party of the workingman. The Raise the Wage Act would hike the minimum wage to $15 per hour by 2024 through annual increases.

Another fly in the ointment to salve the wounded poor is that the value of a national baseline wage depends on where the employees live. Amazon has been widely lauded for its $15-an-hour minimum wage. But where will employees feel that extra dollar or two? Pew Research did the math for us:

“A $15 hourly wage yields $17.10 worth of purchasing power for a worker at Amazon’s Spartanburg, South Carolina, warehouse, for example, but only $13.57 for a worker at the warehouse in Kent, Washington, a Seattle suburb about 20 miles south of the company’s headquarters.”

It sounds positive until you understand what Amazon eliminated in order to accommodate the lower level salaries: stock options. An employee after two years of service would receive one share of the e-tailer’s stock, valued today at $1,671.31, and one share each year after. But Amazon traded that option for the instant gratification of a few extra dollars, even less after taxes, in each paycheck.

To What End?

In 2019, 22 states and the District of Columbia are incrementally increasing their baseline earnings. Yet economists have claimed over the years that the minimum wage only harms those it is intended to help.  So why is there the constant low-frequency drumbeat to continue the practice? The answer is simple: politicians.

Famed economist Ludwig von Mises said it best when he mused about the matter in his 1962 masterpiece, The Ultimate Foundation of Economic Science: “No politician is any longer interested in the question whether a measure is fit to produce the ends aimed at. What alone counts for him is whether the majority of the voters favor or reject it.”

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2 responses to “As Expected $15 Minimum Wage Hurting Workers, by Sarah Cowgill

  1. RantlyMcTirade

    Actually, trading cash income for a whole share of Scamazon’s bubbled up stock is a great deal for the workers. Maybe they’ll have some decent cash to invest when the stock hits $250.

    Liked by 1 person

  2. There are two things that can help people, moreso the youth, to have a better understanding of economics which I’ve attempted as a teacher and sometimes explained to parents. One is to explain how money is made in America, and I must say, I never had this discussion with any of my teachers. Yes, I had to learn this on my own, but I wanted to understand.
    Here, in a nutshell, is what I explain, later allowing questions. Let’s say two people start a business. They have some money, but borrow the bulk from a bank. With plans in hand, they start their store with all the necessities (i.e. building and permits, furniture, lighting and gas, insurance, goods, and more). After a couple of years, they have paid back the bank, including interest, and that interest is created money. But as the company makes more money, they reinvest in the store to sell more products, increase inventory, gain additional workers, and more.
    Well, what does artificially raising the wages do? If the workers work harder, encourage customers to return (Customer relations anyone?), if the management brings in better products, perhaps reducing prices to sell more, then giving the workers more money comes from higher profits. But if they must pay the workers more, but there’s no increase in profits, what does the company and bosses have to do? For some kids, their eyes light up with understanding.
    To the parents, should we have this discussion, I explain that they could start a small business at home, selling lemonade and cookies, or whatever they decide upon. But whatever they decide upon, make certain the kids “see” that whatever moneys they make, whatever profits they gain, goes to pay for any expenses first, then into buying more inventory for sale. Only in this way will they internally understand economics.
    Another thing parents can do when their kids ask for money is take them to work for a day or two. Let them see mom and dad at work. Then, when doing the bills, let them follow the money trail and the checks that must be written, also looking at the spread sheets or check balance book. It might be a real eye-opener.
    You see, whatever money we have we work for, and sometimes in difficult positions. Then, when the bills come around, we pay for the lights you never turn off, the food you eat, and even for insurance so if you get hurt, we can see the doctors who must be paid. They will learn a lot and have a very different view of life, including economics.
    So, you say, okay, I will give you an allowance, but what are you willing to do for the money. And what you do, how is that valuable to me? Of course, it doesn’t have to be that serious, but the points will be made. Why am I paying you to wash the clothes when we paid for those clothes? Hmmmm?

    Liked by 1 person

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