Beware unintended consequences of minimum wage hike

Original Article:

  • Author: Michael Saltsman

  • Publication Date: September 2017

  • Newspaper: Kansas City Star

  • Topics: Minimum Wage

Call it the $15 question: Who’s the real face of a rising minimum wage in Missouri?

An Aug. 28 guest commentary in The Star suggested that the author — an older, college-educated employee supporting a family — was typical of those working in restaurants at the minimum wage. Federal data suggest otherwise: Less than one percent of the restaurant workforce in the Kansas City metro area matches this description. Restaurant employees tend to be younger, most are childless, and over 90 percent have less than a four-year college degree.

But these debates miss the broader point: Your age, race, sex or family status don’t matter if you don’t have a job as a consequence.

In January, labor advocates qualified a dozen different minimum wage initiatives for the 2018 ballot, presumably to toss their financial might behind the proposal that poll-tested best. Missouri Jobs with Justice and its supporters are now collecting signatures for an initiative to raise the state wage floor to $12 an hour by 2023.

Missouri voters should study carefully the evidence from similar minimum wage experiments in west coast locales. Earlier this year, a study from economists at Harvard Business School and Mathematica Policy Research found that San Francisco’s rising minimum wage increased the closure rate for median-rated restaurants. Further north, a city-funded research team at the University of Washington found that Seattle’s rising wage floor left affected employees with $125 less per month on average — when the “raise” was offset by a loss of work hours.

These statistics are backed up by the powerful stories of small business owners unable to offset the crushing increase in labor costs — and of employees who no longer have a place to work. (Over 100 can be viewed at The Bay Area suffered so many restaurant closures at the end of last year that one food-focused publication described it as a “death march.”

Supporters of the initiative may counter that they’re only proposing a $12 mandate here. But cost differences are key: $15 an hour in Seattle is the same as roughly $10 an hour in St. Louis, Columbia, and Kansas City, according to Bankrate’s cost-of-living calculator. In the state’s less-developed corners, this figure would fall even further.

If a minimum wage approaching $15 is an hour is too much for Seattle and San Francisco, then embracing its equivalent could be disastrous for St. Louis or Springfield. (For instance: Economists from Miami and Trinity Universities, following a methodology developed by the nonpartisan Congressional Budget Office, determined that a $11 minimum wage would have cost St. Louis nearly 1,000 jobs.)

For Missourians who are tempted to dismiss the minimum wage debate as a “battle of the studies” disconnected from the lived experience of low-income employees, consider this: Latest Census Bureau data show that youth unemployment in some zip codes in the Kansas City and St. Louis metro areas exceeds 30 percent. What happens to young people who are already struggling to find work when the bar to hire them is raised by 56 percent? (I suspect readers know the answer to that question.)

Reports published in 2015 and 2016 by the Organization for Economic Cooperation and Development found that nearly one-third of young adults aged 16-24 have a poor understanding of basic math. Roughly one in seven had below-basic computer skills, or no knowledge at all of computer use — meaning they’d have difficulty with an internet-based job application. These young adults don’t need a raise. They need the kind of entry-level work experience that will be difficult if not impossible to come by if Missouri embraces a dramatic wage hike.