Minimum Wage Reality

Posted on July 19, 2016

RENÉE LOTH, in a recent piece that was critical of my organization (“Close the ‘subminimum’ wage loophole,” Opinion, July 11), accuses employers of exploiting young employees by paying them a starting wage of less than $15 an hour. In fact, it’s customers’ price sensitivity, not greedy employers, that’s to blame.

A typical restaurant keeps just 3 to 5 cents in profit from each sales dollar, after paying expenses such as food costs and employee wages. In other words, restaurants aren’t sitting on vast amounts of spare cash to offset a 107 percent increase in the base wage for starter jobs.

If restaurants’ price-averse customer base didn’t prefer value menus to tasting menus, paying a 17-year-old $30,000 a year to flip burgers or sweep floors wouldn’t be a problem. In the real world, higher prices mean fewer customers, which is why businesses are forced to adapt to a higher minimum wage by reducing labor costs. That means less service and more automation.

Even proponents acknowledge this reality: In a report touted by labor groups on New York’s minimum wage increase to $15 an hour, the authors estimated that more than 40,000 jobs in the state would be lost due to automation-related adjustments associated with the higher wage floor.

Loth cites a Congressional Budget Office report on a proposed $10.10 federal minimum wage, and suggests that it’s a worthy trade-off to lose half a million jobs (as the CBO projects) to pull a million people out of poverty. Put differently, this means that one person must lose his or her entire income for every two getting a raise that lifts them from poverty. Perhaps Loth would like to use her next column to solicit volunteers.