$15/hour: A job-killing, terrible idea
Author: Michael Saltsman
Publication Date: September 2015
Newspaper: Atlanta Journal Constitution
Topics: Minimum Wage
This summer, 24 McDonald’s restaurants in Georgia installed kiosks where customers place their orders on a touch-screen computer instead of with a cashier.
This automation of entry-level jobs is motivated in large part by labor cost increases, such as those associated with the Affordable Care Act, and — in many markets – higher minimum wages.
If the minimum wage is more than doubled to $15 an hour in Georgia — that’s $30,000 a year full-time — fast food fans can expect these computer cashiers to spread far and wide to the detriment of people who used to fill those jobs.
The rise in popularity of a $15 minimum wage is explained not by economics, but by the enormous sums of cash spent on the effort by the Service Employees International Union. As part of a bid to unionize the fast-food industry, government filings suggest the union has spent $45,000 per day over the last three years fighting for $15.
While the effort has yet to yield new union members, the union has enjoyed policy victories in a handful of far-left locales such as Seattle and San Francisco.
Not surprisingly, there are warning signs already that the policy is a terrible idea. Ritu Shah Burnham, a Z Pizza franchise owner in Seattle, was forced to close her store and lay off 12 employees after the city passed a law raising its minimum wage to $15 an hour. Or ask the owners of Source, Luna Park, or Abbots Cellar in San Francisco, all restaurants that closed this year, citing the city’s wage floor as a factor.
These are just a few of the real-life stories of small businesses on the West Coast forced to take extreme action in response to drastic municipal wage mandates. (There are more stories available online at FacesOf15.com.)
And these aren’t just anecdotes.
The nonpartisan Congressional Budget Office predicted last year that the country would lose 500,000 jobs if it adopted a $10.10 minimum wage nationwide. This prediction, based on a review of the most credible economic research on the subject, suggest that job loss would only be compounded by a $15 minimum wage.
Even liberal economists — including former appointees and advisers to presidents Barack Obama and Bill Clinton, have opposed the push for a $15 minimum wage.
This opposition isn’t based on knee-jerk partisanship, but rather the stark economic realities faced by effected businesses. While proponents try to direct your attention to the compensation of a handful of industry CEOs, the truth is their pay packages have nothing to do with the day-to-day realities of running a restaurant.
Raising prices to offset the cost of $15 isn’t an option in this competitive economy where price-sensitive customers can simply stay at home, rather than eat out. For the business owner, that means cutting costs or closing doors; for the employees, it means reduced hours, layoffs or replacement by computerized alternatives.
There is a better solution that can actually help low-income employees without putting at risk their jobs and the small businesses that employ them. It’s called the Earned Income Tax Credit. It supplements the incomes of low-income employees through the tax code rather than an unworkable mandate. It is better targeted than the minimum wage. It has a track record of reducing poverty and it enjoys support from both sides of the political spectrum.
The EITC should be expanded so that low-wage employees — particularly those without children — can live a little easier while still getting the work experience they need to someday earn far more than the minimum wage.
As Vice President Joe Biden said in his speech last Thursday in New York, “A job is more than a paycheck.” Nowhere is that more true than for minimum-wage employees who want to learn skills to quickly climb the career ladder. Unfortunately, a $15 minimum wage would eliminate the first rung.