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