A $15 minimum wage devalues hard work

Original Article: http://www.crainsnewyork.com/article/20150916/OPINION/150919923/a-15-minimum-wage-devalues-hard-work

  • Author: Michael Saltsman

  • Publication Date: September 2015

  • Newspaper: Crain's New York Business

  • Topics: Minimum Wage

Who stands to lose the most from Gov. Andrew Cuomo’s $15 fast-food wage?

During this summer’s wage board hearings, business owners and researchers made the case that inexperienced employees, whose skills might not command a $15 hourly wage, had arguably little to gain and their jobs to lose from a $30,000-per-year wage mandate.

That’s certainly true. But there’s another group of employees—more-experienced staffers who already earn $15 an hour—who stand to lose something other than their jobs: They’ll lose the value of their hard work.

The Bureau of Labor Statistics reports that the median hourly wage in New York for first-line supervisors of food-service employees is $16 an hour. That’s almost double the state minimum wage of $8.75. Put yourself in their shoes: If you’d worked long and hard to earn that supervisor paycheck, how would you feel about a new law that pays just $1 an hour less to employees who lack a day of work experience?

The answer, according to the Employment Policies Institute’s recent survey of 301 employees currently earning $12 to $15 an hour, is “not very good.” Among these survey respondents, a majority of whom had two or more years of work experience and at least some college education, 46% opposed a law paying new staff the same hourly wage that they earned. Unsurprisingly, more than 90% expected a substantial pay raise of their own if the lowest-paid staffers were to earn managerial wages.

This is not a hypothetical concern. As New York deliberated over the fast-food wage board’s report, one tech CEO on the other side of the country was learning this lesson the hard way. The CEO of Seattle’s Gravity Payments drew flattering press coverage earlier this year when he announced a minimum wage of $70,000 per year for all company employees. In a follow-up story, The New York Times reported that all was not well.

Two of the company’s top employees quit as a consequence of the policy, upset that it would “double the pay of some new hires” while more-experienced employees received much less. One former employee quoted in the Times put it this way: “[The CEO] gave raises to the people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump.”

This unfair pay policy is coming soon to fast-food restaurants across New York state, where managers are unlikely to see their pay nearly double to match the increase enjoyed by their entry-level counterparts.

A related concern is that New York’s $15 wage floor will act as a disincentive for young adults to seek further education. (My organization’s new billboard in Times Square makes this point explicitly, asking, “Who needs an education or hard work when Gov. Cuomo is raising the minimum wage to $15 an hour?”) Economists David Neumark and William Wascher report that past increases in the minimum wage have led to lower school enrollment rates for teenagers.

Notably, this decline in enrollment occurred following much more modest wage hikes. With a $30,000 per-year salary available without even a high-school diploma, what’s the point of finishing school?

Not all employees will have this option, of course. With a $15 minimum hourly wage, many fast-food establishments in New York will follow in the footsteps of their European counterparts and replace full-service cashiers with self-service iPads. Writ large, that means thousands fewer jobs for young adults and others looking to get started on the career ladder. The lucky few who can snag an entry-level job paying middle-class wages may be better off, but others who lose their job, or who lose the value of years of hard work, most certainly won’t be.