Wage hike a publicity stunt

Original Article: http://www.detroitnews.com/story/opinion/2017/03/02/minimum-wage/98665812/

  • Author: Michael Saltsman

  • Publication Date: March 2017

  • Newspaper: Detroit News

  • Topics: Minimum Wage

Shortly after announcing his candidacy for mayor of Detroit, state Sen. Coleman A. Young II proposed raising Michigan’s minimum wage to $15 an hour. It appears the state senator has the same careless touch in crafting economic policy that his father often had in running the city.

The younger Young launched his campaign with familiar rhetoric, contrasting the new wave of prosperity downtown with the continuing poverty in “the neighborhoods.” (Coleman Young Sr. preferred using the Detroit suburbs, where I grew up, as his bogeyman.) The $15 minimum wage — which would take effect almost immediately, at the start of 2018 — is presumably part of Young’s agenda to “serve the powerless.”

It’s a quaint thought, but serving the powerless and the jobless requires more thought than simply passing a bill that makes them 68 percent more expensive to hire.

To understand just how radical Young’s proposal is, consider the current minimum wage workforce in Michigan. As of 2015, just 2 percent of the hourly workforce earned at or near the state’s minimum wage. It truly is a “starter” wage that employees earn briefly before moving on to a higher wage. (Two separate studies confirm that two-thirds of minimum wage employees earn a raise in 1-12 months on the job.)

Were a $15 minimum wage to pass, an incredible 40 percent of the state’s hourly workforce would now earn the “minimum wage.” According to data from the Bureau of Labor Statistics, that means new-to-the-job cashiers, dishwashers, or burger cooks would now earn the same wage as rehabilitation counselors, preschool teachers, and social science research assistants — professionals who may have gone to school for years to earn that wage.

If that sounds unsustainable, it’s because it is. For his plan to work, Young would need to adapt his campaign slogan to inform voters, “I’ll fight for $15 — and you’ll pay for it.” Consider the restaurant industry: One estimate from the Heritage Foundation found that fast food prices would have to rise by as much as 38 percent to offset the cost of a $15 minimum wage. But customers are price sensitive — there’s a reason the dollar menu exists, after all — and there’s no way an increase of this magnitude would pass muster, in Detroit or anywhere else.

Instead, employers will adapt to $15 by otherwise cutting service costs. Large fast food chains have already begun this transition, replacing cashiers with self-service kiosks where customers can order and pay — no human interaction required. Other restaurants would adapt by reducing the number of staff on any given shift. (My first job, clearing tables at a restaurant in Canterbury Village in Lake Orion, would not have existed were the minimum wage set at $15 an hour.)

These consequences are as tragic as they are predictable. A 2015 survey of U.S. labor economists, conducted by the University of New Hampshire, found that three-quarters believed a broad $15 minimum wage would reduce the number of jobs available. In states and localities that have experimented with a wage mandate of this magnitude, that’s exactly what’s happened, with businesses shedding staff, leaving the state, or closing altogether. (Dozens of stories are available at FacesOf15.com.)

Wayne County in particular can’t afford this hollowing out of its entry-level workforce. The youth unemployment rate in the county is averaging 20 percent currently — compared to 16 percent statewide and 15 percent nationally. Nearly two-thirds of young adults in the county aren’t in the workforce at all.

Young says he wants to “put the citizens of Detroit back to work,” and it’s a laudable sentiment. But he won’t succeed in his mission by creating unrealistic new barriers to their employment.