Thursday, November 13, 2014

Raising the Minimum Wage

There's been much talk lately about raising the federal minimum wage. It's very hard to see, however, how such a move will not do more harm than good.

When the minimum wage is raised it's not just the wages of the very lowest paid workers that must be raised. Everyone's wages must go up. When the lowest paid entry level workers have their starting wage increased to, say, $10 an hour those who have been employed by that business for a longer time who are also making $10 and hour are going to resent that new hires are making as much as they are. Thus, the salaries of these more experienced workers will also rise. The raises will ripple right up the entire wage structure of the business.

In the end, many small businesses will be unable to survive without raising their prices, laying people off, or refusing to hire new employees. Many other businesses will simply have to close down. How does any of this help anyone?

The Federalist has a couple of stories about how small businesses and the people who work for them are suffering as a result of raises to their state's minimum wage. Here are some excerpts:
“I got my son back because I worked here. It kept me out of trouble and on the right path,” Stacey Osborn said.

Osborn lives in Hillsdale, a small town in rural Michigan. She used to work at Tastes of Life, a local restaurant that supported a residential program, Life Challenge of Michigan. It provided training in social, developmental, waitressing, and cooking skills to people who needed help getting on their feet. Some employees had cancer, experienced deaths in the family, spent time in jail, or struggled with substance abuse.

That is, until Michigan’s legislature hiked the mandatory minimum wage.

Osborn was with Tastes of Life from day one—Father’s Day of 2012—until the restaurant closed on September 28 because of the minimum wage hike. She said she came to the restaurant with a lot of problems that the owners, Pastor Jack Mosley and his wife, Linda, helped her through.

“I could go to them for anything,” Osborn said. “It hurts so bad that it closed.”

Mosley explained that, unlike a typical business that might fire a chef with a hot temper “who breaks dishes,” Tastes of Life managers were more long-suffering and wanted to help employees polish their life skills.

“Life has issues,” Mosley said. “This was a place to shore them up, and help them cope and get through.”

Osborn said she has looked for other jobs, but nothing compares to what Tastes of Life was to her. Instead of working for a warm family restaurant, Osborn has found herself bartending late at night. She doesn’t want to work someplace that will send her in the wrong direction.

“I did the math and realized I would need 200 more customers a week to stay open,” Mosley said.

That, accompanied by the fact that many of their customers go south for the winter and food prices have risen dramatically, forced Mosley to close doors. Twelve people lost their jobs.

Terry Hatch, another Tastes of Life employee, had worked at the restaurant for six months.

“I have a few disabilities and this gave me friends. It was a lot more than a paycheck,” Hatch added.

Lori Burger, manager of Hillsdale’s House of Pizza and BBQ, said she has started cutting her employees’ hours. She employs seven young women, and the minimum wage affects her profit margin.

Although she will keep taking applications, she said there’s no sense in hiring new employees when she is cutting hours for the ones she already has.

The very people the wage hike is supposed to help end up with a higher wage, but less work. Lisa Slade has worked at the Finish Line Restaurant since 1976 and now owns the business. She said the first incremental wage increase hasn’t affected her yet because she only has one minimum-wage employee. However, she said the future increases will mean she’ll have to raise menu prices.

“It irritates me because the government dictates what to pay,” Slade said. “I like to give people raises when they do a good job. The guy who is doing a good job shouldn’t make the same amount as the guy who is still learning.”

Pai Ringenberg, owner of the Coffee Cup Diner, shared Slade’s sentiment.

She said if lawmakers raise the wage, businesses will raise prices to cover it, and that influences everyone’s cost of living. As a result, lawmakers will want to raise the wage again.

In the end, a forced wage increase only makes it harder for people to get into the workplace. If employers have to pay more, they want their employees to come with more specialized skills and stronger work ethics.

But entry-level workplaces such as restaurants or retail stores can’t survive under the pressure. The wage increase discourages entrepreneurs from chasing the American Dream, because they can’t afford the price tag.

As Osborn’s story shows, the very people the minimum wage hike was sold as helping often lose their jobs because of it. Those who need more work hours are getting fewer, and those who would have benefited from lower prices are paying more for everyday items. The minimum wage hike is a self-destructing initiative—just ask your local barista.
Raising the minimum wage is a bad idea, and imposing it on employers is an abuse of power. People should be paid according to their value to their employer, not according to what bureaucrats in some state capital or worse, in Washington, D.C., think they're worth. If the job is such that it requires no particular skill or talent then why should employers be forced by the state to pay as if it does? The value of someone's work is something that should be agreed upon between employer and employee. If an employee doesn't want to work for what the employer wants to pay then they're free to look for work elsewhere.

For the state to dictate what employers must pay their employees is yet another symptom of the modern usurpation of our liberty by a metastasizing government.