Minimum Wage, Maximum Folly

Posted in September 7th, 2008

Submitted by CARPE DIEM

An anonymous left today about this CD post from June:

I own and operate a restaurant in a rural area of California (20,000 population) that is also a seasonal tourist destination and popular retirement spot. In the first three months of 2008, following California’s January 1 increase in the minimum wage to $8 per hour, five restaurants went out of business. Restaurants often fail, but these are places that have been in business for long periods (two for 15 years, one for 12 years, and two for 1-3 years). And from my own standpoint, although I did not downsize the number of my employees (20), ALL except two have had to absorb significant cuts in their hours.

I hate to sound like a conspiracy nut, but to anyone with common sense the minimum wage, is dangerous in two ways:

1. Warm fuzzy feelings for the working poor- “Golly, I’m poor and look at what the Democrats are doing for me! They must really be concerned!” Except that the economy resets itself in short order and they end up being in worse shape in the long run.

2. Creating the new poor from the middle class. If minimum wage “Employee A” who is mildly competent receives a compelled, arbitrary, raise, there is less chance that “Employee B” who is a stellar performer will receive any more than the same. Also, “Employee C” who makes a couple of dollars more will also need to get a raise, but because there is only so much money to go around, will get a much smaller raise, percentage wise, and so will fall closer to the minimum. And then, because everybody’s hours are cut and fewer overtime hours are allowed, there is less money at the end of the pay period. All because some politicians want to seem “magnanimous” while using other peoples’ money.

MP: Even in cases when the increase in the minimum wage doesn’t affect the number of unskilled workers employed (like in the case of this restaurant owner), that’s not to say that the minimum wage workers are not adversely affected. As this example illustrates, workers’ hours are cut, and their overtime opportunities are reduced or elminiated, making them worse off as a result of the mandated increase in the minimum wage.