In just over 15 months, both my oldest daughters will likely have their driver’s licenses. In addition to driving themselves to school, football games, etc., they’ll also be able to get to a job. Thank goodness we live in Texas because they’ll face one less obstacle to finding employment than kids in other states: a minimum wage prohibited by law from rising higher than the federal $7.25 level.
Many Teenagers Would Stay Unemployed
In their drive to shield all manner of folks from the responsibilities of adulthood, House Democrats on Thursday passed legislation to double this price floor. Even though many starting wages here in San Antonio are above the current minimum, they are well below the $15 proposal. Needless to say, this proposal would shut out many teenagers who would not be grandfathered in by current jobs. On the flip side, it would attract some to an easier gig than what they currently have to do for roughly the same pay.
This perversion reflects the left’s general (mis)understanding of economics and incentives, not to mention human nature. So convinced are they of the virtues of this policy that they dismiss job losses of as much as nearly four million, according to a recent CBO report, as “worth whatever the cost might be.” The cynic could be forgiven for seeing this as a step closer to total government dependence when combined with a universal basic income, a supposed solution to the imminent takeover of our society by robots.
To the extent that it makes such jobs vanish, it’s a quiet disappearance via attrition: A worker leaves but is not replaced.
Businesses’ constant drive to keep costs low in order to stay afloat, and by extension maintain a payroll, has prompted many to utilize automation, which ironically makes these price controls obsolete. To the extent that it makes such jobs vanish, it’s a quiet disappearance via attrition: A worker leaves but is not replaced. Bigger companies can afford to experiment and deploy cost-saving technology. As a result, a hike in the minimum wage is an affordable, temporary uptick against revenues. It is also an assist from the government in keeping smaller competitors at bay.
As a result, some companies are indifferent to it. Others, not so much.
During a debate last year about the Alamo City’s proposed paid sick leave ordinance, a woman told me she already offers it to her employees and that her rivals should be compelled to do the same in order to “level the playing field.”
When Amazon announces that they “intend to … gain congressional support for an increase in the federal minimum wage” to the same $15 level they just granted to their employees, the scale is different, but the principle is the same. Politicians laying out plans to “revitalize … rural America” should know better when Walmart urges “Congress to boost the federal minimum wage.” It’s reminiscent of when golf courses tried to “Tiger-proof” their holes by lengthening them to a distance manageable only by… Tiger Woods. Instead of leveling the playing field, they ended up giving Woods an advantage by narrowing the field of likely contenders.
A $15 Minimum Wage Would Hurt Small Businesses
Smaller companies are less able to absorb higher labor costs. At some point, the owner cannot support herself and her family and therefore has to abandon her venture and find paid employment at a bigger firm. Meanwhile, her former employees join the increased supply of labor clamoring for work at the bigger company that needs fewer employees thanks to the aforementioned technology. This is how monopolies and monopsonies (sole buyer of labor) are born.
This is not at all an argument against automation, which itself is a sign of progress and prosperity. Oftentimes, a small business needs manual help to get off the ground. Oftentimes, a small business needs manual help to get off the ground. It is doubtful, judging by their modest storefronts, that local businesses can do so with anything more than basic technology i.e. cash register, debit card machine, etc. They need the flexibility to find just the right people at freely agreed upon wages who are happy to get their foot in the door. This is as much a case of jobs that will never be created as it is those we see today that will disappear.
As it is, the only doors my daughters have wedged open are mine and their mother’s. I’m happy to keep paying them to tend to the lawn so I can play my bass and drums. I would, however, appreciate the workout from pushing a mower around a third of an acre if they landed a job somewhere, though I suspect my wife would soon hire a housekeeper to make up for the lost mopping services. But hey, that would lower unemployment by three people.
Chris Baecker
Christopher E. Baecker teaches economics at Northwest Vista College, is the policy director and editor at InfuseSA, and is a board member for the Institute for Objective Policy Assessment.