Issues & Insights

Do Dems’ Care Minimum-Wage Hike Will Devastate Poor, Minorities?

Fast food workers strike for $15 minimum wage. Photo: Fibonacci Blue, licensed under the Creative Commons Attribution 2.0 Generic license (https://creativecommons.org/licenses/by/2.0/deed.en).

I&I Editorial

Democrats like to talk about helping the “little guy” struggling to make it in an economically hostile world. But instead of providing help, their policies often punish the most vulnerable among us. So it is with the fight to raise the minimum wage to $15 an hour, as recent research shows.

Democrats have included a federal $15-an-hour minimum wage in the $1.9 trillion pork-a-palooza reconciliation bill they call “stimulus.” The left-media, predictably, have supported the idea. But a minimum wage hike is not stimulus. It is, in fact, a devastating blow to small, struggling businesses and, worst of all, for the poorest Americans; it’s a recipe for fewer jobs, lower incomes and lasting economic inequality.

We’ve written about this numerous times (for example, here, here, and here) because, as policies go, the minimum wage is awful. While sounding as if it’s a great gift to working people (in polls, it routinely garners more than 50% approval), the minimum wage’s real beneficiary is one of the Democrats’ major financial backers: Organized labor.

Unions love minimum-wage hikes because many of their contracts have clauses that automatically raise union wages or allow the unions to renegotiate contracts when minimum wages go up.

So, not by coincidence, Democrats love minimum-wage hikes, too. Unfortunately, recent research has bad news for minimum-wage hike supporters.

A new report from the Congressional Budget Office estimates the Democrats’ proposal will kill 1.4 million jobs. Meanwhile, this month, a CNBC/SurveyMonkey poll of small businesses showed that one-third said they would lay off workers if the minimum wage went to $15 an hour.

So while a handful of the best-trained, most-skilled people at small businesses, restaurants and big retail chains might see higher wages, any workers who aren’t worth $15 an hour will be let go.

We’ve just seen how that works at the local level. The mayor of the port city of Long Beach, California, tweeted triumphantly on Jan. 19 this year: “Tomorrow, on the day we inaugurate our new president, I’ll sign into law a $4 an hour hero pay increase to our hardworking grocery and supermarket workers.”

The triumph was short-lived. Within days, the Kroger supermarket chain announced it would close two stores in Long Beach because they would no longer be profitable after the wage hikes. (Note to Long Beach’s mayor: Supermarkets have a less-than-2% profit margin.) So now dozens of Kroger employees will have no jobs, thousands of local citizens will have fewer food choices and higher prices, and the city of Long Beach will have less tax revenues. Everyone loses.

That’s just one industry, in one city. Other cities, including Seattle and San Francisco, have had similar experiences following recent hikes in minimum wages. Fewer jobs, more welfare, increased local poverty, more business closures.

Now imagine a doubling of the minimum wage across the entire country, even phased in over four years, as planned. What happens then?

“The cost burden falls disproportionately on small- and mid-sized retailers, restaurants, low-skill manufacturers and nonprofit social service agencies with low margins,” according to a recent report by the American Institute for Economic Research. “These business owners already are struggling to cover the rising costs of health insurance, workers’ compensation and regulatory compliance. They also have to compete with big box retailers, restaurant chains and overseas producers.”

It’s true that a number of major employers, including McDonald’s, Amazon and Walmart, have won applause from unions and left-leaning politicians for promising to raise wages for workers on their own.

What they don’t say is that all of them also are now investing in labor-saving technology and robots that will displace future jobs for low-end workers. Again, more job losses. Thanks, minimum wage!

By the way, who gets the jobs that remain? Not the unskilled working poor. A study published last year by the National Bureau of Economic Research found that when minimum wages rise, businesses replace lower-skilled workers with more-experienced, better-educated workers, thus guaranteeing more unemployment and higher poverty at the very lowest levels of our economy.

Nationwide, some 17 million workers now make less than $15 an hour. A wage floor of $13 an hour full-time would move the average poor person out of poverty. The CBO estimates that a minimum wage hike would thus move about 900,000 people out of poverty.

Tragically, that’s far fewer than the 1.4 million who will lose jobs instead of gaining valuable training, skills and experience so they can earn more later.

However you slice it, the very young, poor minorities, immigrants, the unskilled and the least educated pay dearly for minimum wage hikes. As research shows, they’ll be trapped in an economic never-never land, forever unemployable because they don’t have the skills, education, training or experience to justify a higher wage.

— Written by the I&I Editorial Board

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I & I Editorial Board

The Issues and Insights Editorial Board has decades of experience in journalism, commentary and public policy.

6 comments

  • Higher wage earners are rejoicing as the impact on their wages will be fantastic in the next 10 to 20 years. Our elected officials never look at the unintended consequences that higher wages for everyone will benefit the rich more than those on minimum wage.

    The new minimum wage crusade will result in ALL wages increasing. Cost Of Living Adjustments (COLA) to wages favors the well paid: For example: a 3% COLA adjustment for someone making $100K will result in their compensation being almost $135K in 10 years (a $35K gain), but for someone making $30K, their compensation will be $40K in 10 years (a 10K gain). The unintended consequence of raising the minimum wage would be $25K more for the well compensated as the financially challenged continue to fall further behind.

    Throwing money as a band aid to cover the rising costs for everyone buys votes for reelection, but does not heal the wound of WHY the costs are rising.

  • A big problem is One Size Fits All, the do-gooder and socialist bureaucratic ethos or mentality. Unfortunately, national minimum wages impact varied areas differently. Rural areas differ from urban areas; ditto high cost-of-living versus low cost-of-living regions and states. Therefore, minimum wages are best enacted at local levels, rather than a national level.

    But economic reality means little to the those of the totalitarian socialist persuasion who recently took control of the USA national government. These ideologues who rode to power on voting irregularities (to use a polite euphemism) care little about adverse economic outcomes (e.g. day 1, 50,000 fossil fuel-related jobs needlessly wiped out). In Long Beach, California, the city council enacted a several dollar per hour Hero Worker increase for supermarket workers, and immediately 2 major chain supermarkets with marginal economics announced permanent closure; and several hundred workers will be added to the unemployment rolls at a time the economy can least afford it. But the government workers who suffered no economic losses and collected their stimulus bonuses can care less. One might call them Self-centered, Greedy Socialists who only care about Themselves. Government workers will never learn economics or care about free markets until they lose their own jobs. Blue state bailouts are designed to prevent coddled government workers from ever learning. The political elites like it that way, as they are Lords of the Manor with favors to dole out in the new socialistic feudal states.

  • Destroying the middle class and decimating the lower class is a feature not a bug in the Democrat elites’ plans.

  • The answer is no. Union wages are tied to the national minimum wage and increasing the minimum wage benefits the unions. Once you take this into consideration, you know who and where the effort benefits most.

  • Those on the Left never consider the unintended consequences of such a change.
    It sounds like a good idea until small businesses have to reduce the number of people they can afford to pay. It hurts the both employers and employees.

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