Friday, June 10, 2016


D.C. Minimum Wage Hike: Liberals Feel Dandy, Low-Income Kids Get HurtThe D.C. City Council has voted unanimously to adopt a measure to increase local unemployment, especially among minority youths, who are most in need of that entry-level job, and ultimately to usher in more automation.

Of course, they didn't quite put it that way.

As the Washington Post described it, the City Council "unanimously approved a plan to ratchet up the city’s hourly minimum wage to $15 on Tuesday, and Mayor Muriel E. Bowser pledged to sign the measure into law, likely lifting low-income pay rates in the District to among the highest in the nation within four years."

A prominent local labor leader, Jaime Contreras, vice president of the Service Employees International 32BJ, praised the Council and D.C. Mayor Muriel Bowser for “pushing one of the nation’s highest minimum wages to help dig men and women out of poverty.”

Here is a news flash for Mr. Contreras: yes, the new minimum wage hike will definitely help a small number of workers. According to the Bureau of Labor Statistics, about 4.3 percent of hourly workers are paid at or below the minimum wage. Many of these, if their employers deem them worth the new minimum and keep them on, will benefit. But the new minimum wage will likely do long-term damage to far more people than it helps. In other words, it is a typical liberal cause celebre. Liberals feel dandy, poor people get hurt.

In an alarming foreshadowing of what this kind of compassion is likely to bring to D.C. workers, a number of small businesses and restaurants already have closed in the San Francisco area as the direct result of the $15 minimum wage hike there. It reminds us of the harsh truth, formulated by Milton Friedman: the Nobel laureate economist once asked what the real minimum wage is and replied that it is zero. Instead of getting $15 an hour, many laid-off workers, many of whom were earning above minimum wage to begin with, are now earning zero.

Don't think it can't happen in D.C., a city we sometimes regard as fireproof because of the number of rich lobbyists who come here to seek government favors and, in the process, build fancy houses and patronize expensive restaurants. A survey of a hundred businesses by the Employment Policies Institute entitled "Anticipated Reactions to a $15 Minimum Wage in Washington, D.C.," found that the new minimum wage might be less rosy than the Council thinks. Six percent of the businesses surveyed by the Employment Policies Institute indicated that they were "very likely" to close as a result of a $15 minimum wage, while a walloping 16 percent indicated that they were "somewhat likely" to close.

Thirty-five percent of businesses included in the survey said that they would likely cut the number of employees in response to the $15 minimum wage. Thirty-seven percent predicted that they would cut back on the hours worked by current employees. The most interesting question on the survey: Is D.C. becoming unfriendly to business? Fifty percent "strongly agreed," while an additional seventeen percent "somewhat agreed."

The people most harmed by the minimum wage hike will be minority youths, who especially need entry-level jobs. Entry-level jobs introduce people to the habits required in the workplace and allow them to gain the skills to move up. There will simply be fewer of these jobs. Even the Los Angeles Times, no bastion of conservatism, in a recent story on four likely consequences of the minimum wage hike, acknowledged that hikes in the minimum wage "could hurt opportunities, especially for black teenagers, one of the most vulnerable groups in America." The newspaper cited an unemployment rate of twenty-five percent for black youths aged sixteen to nineteen, compared to nearly fourteen percent for white youth and nearly sixteen percent for Latino youths.

Supply side economist Arthur Laffer was quoted on the tie-in to high crime and youth unemployment. "If policymakers blame high crime in cities such as Chicago on steep poverty and unemployment, Laffer asked, should they still advocate for a high minimum wage that might reduce jobs for the youth and exacerbate social problems?"

Another irony is that the new wage hike sets up a situation that, in many instances, will force many employers to pay higher wages to the inferior workers! Workers who get tips will see their base pay go from the current $2.77 an hour to $5 an hour, but employers will be required to make up the difference to reach $15 an hour, counting tips. Less able employees, the ones who do not give the kind of service that gets high tips, will actually become more expensive to hire than the best workers.

It is easy to imagine that tipped workers who do a middling job at first, but in the past held onto their jobs long enough to improve and earn more, won't get that chance under the new regime: they'll be too expensive and won’t be hired or will be quickly let go. The hotshot wait staff will simply serve larger areas and young people who might have gotten a toehold will be denied.

Advocates of drastic minimum wage hikes simply refuse to recognize the effect on the job market--indeed, the economist Walter Williams in the past has warned that one reason advocates want future increases tied to inflation is that this automatic hike will prevent consideration of the effects that would come with further public debate.

It is easy to see the rhetorical appeal of a minimum wage hike to $15 an hour--after all, we, as decent people, want workers to make as much as they can and be able to provide themselves with decent living arrangements (as long as this doesn't mean our favorite fancy restaurant has suddenly become prohibitively expensive!).

What is reprehensible is that political leaders, caught up in slogans and the desire to be re-elected, refuse to see that the minimum wage is going to provide job enrichment mostly for one category of people: politicians. No, Mr. Contreras, having one of the highest minimum wages in the nation is not going to "help dig men and women out of poverty.”

That is a talking point. The reality is, sadly,  different.

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