Rising Wages Hurts Minimum Wage Workers
A promise of raising the minimum wage was an absolute necessity for progressive voters in the presidential election. The idea caught on with the coastal elites.
Yet it wasn’t appealing to the white working-class voters who swung the election to Donald Trump.
$15 Minimum Wage
Seattle passed a law to raise the minimum wage in the city to $15 an hour last year. That minimum wage hasn’t kicked in yet, but the negative impacts have already been felt.
From a piece by Kevin Williamson in National Review:
“The study, commissioned by the city government of Seattle and published by the National Bureau of Economic Research, found that Seattle’s law incrementally raising its minimum wage — to $13 an hour last year, en route to $15 — resulted in low-wage workers’ earning less money rather than more.
This surprised many in Seattle, who had been assured by all the best economists, including Paul Krugman, that such a thing would not come to pass.”
Any studies that the minimum wage would raise total income for minimum wage workers held other important variables constant. The biggest factor is hours of work available.
In the fast food industry, we can think of automatic ordering screens that have taken the place of minimum wage jobs.
In supermarkets, automatic checkouts have taken jobs.
Williamson made the argument very succinctly:
“You can pass a law saying you have to pay low-wage workers more, but you cannot pass a law that says you have to hire them in the first place, or that you cannot cut back on hours when the price of hourly labor goes up.
As businesses responded to the new higher labor costs by reorganizing their processes in less labor-intensive ways (the classic examples here are the replacement of wait staff with computer screens in restaurants and the replacement of bank clerks with more sophisticated ATMs), the law that was supposed to increase low-wage workers’ incomes actually reduced them — substantially, by an average of $125 a month.”
When Bernie Sanders ran for president the Economist questioned the wisdom of his economic policies. Promising a $15 per hour minimum wage proved Bernie Sanders bona fides as a socialist and helped provide momentum to his insurgent campaign for the Democratic presidential nomination.
Hillary Clinton began the campaign promising a $12 per hour minimum wage then matched Bernie at $15 per hour. The so-called Bernie Bros saw through the transparency of Clinton and stayed away from the voting booth.
The folly of the liberal urge to force behavior without thought to outcomes proves why the pendulum eventually swings away from such intrusive government policies.
The business owners who drive free market economies aren’t in business for socialist reasons. They are in business to turn a profit.
When governments cross the line from protecting society from abuse to trying to serve as a mechanism of wealth redistribution they often hurt those people they are trying to help.
In the case of Seattle’s minimum wage gouge, successful entrepreneurs found smarter ways to deliver products and services. It appears they have done so by reducing overall wage costs.
Those entrepreneurs who didn’t reduce wage costs are likely facing stress if they are still in business.
The outcome of raising the minimum wage has been to hurt poor people. Time magazine predicted this outcome. Unfortunately, the left doesn’t see it coming.