Lawmakers incentivize higher wages without mandating them

Posted on December 05, 2017

In response to the Trump administration’s tax overhaul, Wells Fargo and Fifth Third Bancorp will raise their minimum wages to $15 per hour (“Corporations pledge to share the wealth,” Dec. 21). AT&T and Comcast also pledged to pay a $1,000 bonus to each of their U.S. employees. It’s a good example of how lawmakers can incentivize higher wages instead of universally mandating them.

This year, we saw an opposing example in Seattle. A team of city-funded economists at the University of Washington found that Seattle’s $15 minimum wage mandate had caused employee pay to decrease. That’s because the mandated increase in hourly pay was offset by a drop in work hours, when businesses with razor-thin profit margins couldn’t offset the labor cost increase with higher prices.

When employers have the freedom to manage their businesses, less-skilled workers benefit. But forcing employers to pay higher wages costs employees their jobs.