Higher Minimum Wage Means Fewer Jobs

Posted on January 09, 2013

In a recent Detroit News commentary (“Hike the Minimum Wage in 2013,” Jan. 5), Darius Ross of Business for a Fair Minimum Wage appeals to his professional experience to argue for a higher minimum wage.

Mr. Ross’ affiliation is his undoing. Business for a Fair Minimum Wage is an advocacy group whose membership includes interior designers, self-employed artists, law school deans and chiropractors — none of whom have any particular expertise on whether a wage mandate is a good idea, and who were instead recruited for their ideological support of wage mandates.

So here’s a quick service industry economics lessons for Mr. Ross and the other business members of this advocacy group. Employers that hire minimum wage employees — think restaurants or grocery stores — keep just two to three cents in profit for each sales dollar. This means that, when faced with a 35 percent hike in labor costs (as Mr. Ross proposes), they can’t absorb it. Raising prices on cost-conscious customers means fewer sales, so that’s not typically an option, either.

Instead, these businesses will be forced to provide the same service with fewer employees. That means less full-service and more customer self-service. You might have experienced this trend already when using a self-checkout lane at a grocery store or pumping your own gas at a gas station — “conveniences” that used to be part of someone else’s job description.

Michiganians can expect more job opportunities to disappear if Mr. Ross and his fellow advocates have their way with a $9.80 minimum wage.

Mr. Ross might understand this basic business reality better if he spent more time talking to affected employers rather than rehashing disproven talking points in a state that’s already suffered enough job losses.

Michael Saltsman is the research director at the Employment Policies Institute.