WASHINGTON, June 19, 2017 — On their website, the Fight for $15 movement says they have helped more than 22 million minimum-wage workers win raises. That total includes 10 million minimum-wage workers who are on their way to $15 per hour, which is the goal of the organization.
Fight for $15 is proud of their achievements, particularly because they are helping the lowest paid American workers. They say, “We can’t feed our families, pay our bills or even keep a roof over our heads on minimum wage pay.” And they are correct.
They further note, “McDonald’s and low-wage employers are making billions of dollars and pushing off costs to taxpayers while leaving people like us—the people who do the real work—struggling to survive.”
Their movement has seen some success; a number of cities and a few states have passed legislation to eventually raise the minimum wage to $15 per hour. That means a full-time minimum wage worker who now earns about $15,000 per year will soon earn over $31,000 per year.
For those with jobs, that could be a real lifesaver.
There will also be a ripple effect for workers who have developed additional skills with experience. For instance, a worker who started at minimum wage but who saw his wage rise with experience and new skills would expect to see his wage rise above the minimum. Once the minimum wage goes to $15, what would he be paid? $18? $20?
While the Fight for $15 presents an argument toward which many Americans are sympathetic, success would come with some negative consequences. Raising wage rates above the value of workers’ output result in those workers being unemployed. This is a real problem for unskilled workers.
On November 4, 2014, San Francisco passed Proposition J, which raised the minimum wage to $15 per hour by 2018. In about two weeks, the wage will increase to $14. How is that working out? The Fresno Bee reports that San Francisco (a very affluent community) is experiencing a restaurant “die-off.”
They note that at least 60 restaurants in the San Francisco Bay area have close since last September.
A Harvard Business School study by Michael and Dara lee Luca found that for every $1 increase in the minimum wage, there is a 14 percent increase in the chance of a lower priced restaurant closing. Lower priced restaurants serve lower income communities.
In San Diego, voters raised the minimum wage from $8.50 in 2015 to $10.50 in 2016 and $11.50 this year. Stephen Zolezzi, president of the Food and Beverage Association of San Diego County says to watch for the next mass restaurant die-off in San Diego.
Experience points to exactly what opponents of the minimum wage have been saying for years: Raising the minimum wage will cause job losses for just the people who are least able to rebound from a job loss. It is the logical consequence of a law nearly as iron as the law of gravity: No one will pay you more than you add to the bottom line. If the increase is small, the job loss may be small, but it will always hit the least skilled and least advantaged the hardest.
A fast food restaurant has the option of hiring people to take orders or purchasing touchscreens to let the customers enter their orders themselves. The restaurant owner’s preference is usually to have a person take the order: The personal service is preferred by most customers and there is more flexibility from a person who can make modifications to an order that a machine could not make.
If unskilled workers can be hired for less than the cost of the computerized system, using people makes sense. But if workers must be paid $15 per hour and that is more than the expected cost of the touch screens, then the touchscreens will be used. If the higher minimum wage is paid to servers and preparers, then the added cost may eliminate most or all of the profit, so the restaurant closes.
The real way to increase wages is to have workers become more productive by learning new skills. Employers won’t pay them more otherwise.
Raising the minimum wage does far more harm than good.
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