It seems to be a sick, dramatic irony that the protesting proponents for a higher minimum wage, or a “living wage” as the left has now incongruously deemed it, are acting in accordance with principles of ritualistic self-sacrifice. Minimum wage laws destroy low-skilled jobs and hurt the very economic class the “do-gooders” are trying to save. The very real efforts of these practitioners of self-immolation give metaphorical credence to the eternal aphorism “The road to Hell is paved with good intentions.” While unfortunate, much of progressive history has been steeped with racist and sexist policy. From eugenics advocacy, race-based abortion advancement and defending Jim Crow laws, to special legislation purporting that women must work fewer hours because they were responsible for bearing future generations (and thus were collective property), well-meaning progressives seem to be eternally on the wrong side of history. This time is no different. The persistent push for increasing minimum wage laws hurts low-skilled laborers who are more represented in the lower income brackets.
This past summer, thousands of fast-food workers in multiple cities gathered outside of McDonald’s, Wendy’s, Burger King and other well-established chains asking for an increase in their wages from $7.25 to $15. Online video interviews with protesters show disgruntled employees who argue they cannot “get by” on minimum wage and they “deserve” more for their hard work. Unfortunately, the policy they are advocating would do much more harm than good. If an individual cannot get by on minimum wage, surely they cannot get by on no wage.
If the minimum wage were raised to $15, millions of jobs would be instantly destroyed.
Let’s start by using McDonald’s as an example. McDonald’s has 1.7 million employees worldwide and had a net income of $5.465 billion in 2012. Let’s make the generous assumptions that every employee is making minimum wage and not more, that your average employee works only 40 weeks in a 52 week year and that your average employee works only 20 hours per week. To give each of those employees a $7.75 increase in hourly pay would cost McDonald/s an additional $10.54 billion per year, if everything else is held constant. You’ve now taken a profitable company and bankrupted it, leaving 1.7 million people not with $15 per hour in wages, but with no job.
According to an article by Bernice Napach in The Daily Ticker, Kendall Fells, who is overseeing the New York City protests to raise minimum wage, the average demographic of a fast-food worker is a 28-year-old woman who has children, rent, and other expenses to pay for. Fells said, “There’s plenty of money to pay the workers who work there and new hires without firing anyone.” I personally can’t comprehend how Fells thinks this is mathematically possible, but perhaps I’m missing something.
In modern academia, minimum-wage laws are seen as necessary to help the poor and unskilled. But the history of minimum-wage laws was not always so benign. Thomas Sowell, an economist at Stanford University, points out the first federal minimum-wage law was the Davis-Bacon Act of 1931 and was passed to prevent black construction workers from stealing jobs from white construction workers by working for lower wages. Sowell notes, “It was not meant to protect black workers from ‘exploitation’ but to protect white workers from competition.”
Another example with a less malicious intent is the minimum-wage legislation targeting women in Washington, D.C. in the 1920s. In the case Adkins v. Children’s Hospital, Supreme Court Justice George Sutherland struck down the legislation, arguing it violated women’s right to work as much as they deemed necessary under the 14th Amendment. As Damon Root, writing for Reason magazine notes, “Historian Jim Powell observed this law had thrown numerous women out of work including elevator operator Willie Lyons, one of the figures in the case, who was promptly fired and replaced by a man willing to work at her old wage.”
Time and time again, minimum-wage legislation has harmed those it aims to protect. The Cato Institute has cited data showing job losses in places where living wage laws have been imposed. This summer, Washington, D.C. City Council attempted to pass the “Large Retailer Accountability Act,” which would raise minimum wages for workers at large retailers like Wal-mart, Target and Wegmans from $8.25 per hour to $12.50. Regional Wal-mart manager Alex Barron wrote in an opinion piece to The Washington Post, “As a result [of the ‘Large Retailer and Accountability Act’], Wal-Mart will not pursue stores at Skyland, Capitol Gateway or New York Avenue if the LRAA is passed. What’s more, passage would also jeopardize the three stores already under construction, as we would thoroughly review the financial and legal implications of the bill on those projects.” So, instead of creating hundreds of jobs in the Washington, D.C. area, none will be created.
I would ask that anyone in support of this kind of economically illiterate and numerically impossible legislation go out into local communities and ask low-skilled or unemployed workers if they would rather have a minimum wage job at $8.25 per hour or no job at all.
The secondary effects of minimum-wage laws are that those in lower economic classes never have the opportunity to rise up the ranks by learning valuable job skills. As Thomas Sowell notes, “People in minimum wage jobs do not stay at the minimum wage permanently. Their pay increases as they accumulate experience and develop skills. It increases an average of 30 percent in just their first year of employment, according to the Cato Institute study. Other studies show that low-income people become average people in a few years and high-income people late in life.”
By disabling youth and low-skilled individuals from gaining employment in the first place, “do-gooders” bring the ability for those individuals to work their way up to a screeching halt. In terms of unemployment among youth, Sowell said, “If you go back, to say, the 1950s... you find that at that time the unemployment rate among black teenagers was a fraction of what it is today, and there certainly wasn’t any less racism then than there is today. What was different was at that time the minimum-wage law was a decade old, it was a decade of inflation, and the law hadn’t been changed. So for all practical purposes it didn’t exist.
The kid who is living where I lived then [1949], who is living there now… he has a Hell of a lot harder time finding that job because there are so many good people who try to do good for him and priced him right out of the market.”
Now, this article by no means should be read as arguing businesses should not raise employee wages if they so wish. If a business makes a decision wherein the CEO should not earn a large salary, that it should not expand at the expense of worker wages and that shareholders should not be paid at a given dividend rate, thus instead using profits to raise workers’ wages, the business should do just that. There is nothing from stopping the thousands of protesters from founding their own fast-food chain and paying workers a higher wage. I think they will find it harder to accomplish than they believe.
Given the above, I am entirely sympathetic to the arguments given by the protestors, but I firmly believe the policies they are advocating will disproportionately hurt young people and those individuals with only low-skilled labor to offer employers. Rather than achieving a living wage, what the protestors are really advocating for is no wage, for themselves and for those who will come after.
How do you feel about a mandatory wage increase? Please send all feedback to opinion@dailycardinal.com.
