Much like malaria, we are never totally cured of the the “living wage” myth which erupts every few years on the political scene. This time around the Service Employees International Union is leading the charge along with Progressive Democrats of America. The goal is to create a nationwide $15 an hour minimum wage.
The focus is on food service workers. The slogan is, “Fight for 15!”
Apparently wages, prices, and other economic stuff do not find their levels through the laws of economics (such as the Law of Demand) and free market forces, but are really arbitrary! So, a better approach would be to use Massachusetts Institute of Technology’s Living Wage Calculator for Tucson
(I’m not making this up). A prospective employee who applies at McDonalds can check the box that describes his household and his wage will be set—everyone who works hard will be able to support his family!
Speaking of the Law of Demand, what will happen if entry level fast food wages are artificially bumped up to fifteen dollars? Well, according to the law, as prices go up, demand goes down. Fewer people will be employed. More importantly, those who will be retained or newly hired will be generally higher skilled or experienced to meet the productivity demands of the higher wage. As a result, the low skilled inexperienced workers—those whom we presumably want to help - will be shut out of the labor market. They will be denied the opportunity to learn work habits and skills on the job.
It is actually more sinister than that. As economist Thomas Sowell notes
, “The last year when the black unemployment rate was lower than the white unemployment rate was 1930, the last year before there was a federal minimum wage law.” Sowell adds, “The following year, the Davis-Bacon Act of 1931 was passed, requiring minimum wages in the construction industry. This was in response to complaints that construction companies with non-union black construction workers were able to underbid construction companies with unionized white workers (whose unions would not admit blacks).” If you ever wondered why the AFL-CIO supports increasing the minimum wage when its members already earn well in excess of that wage, now you know.
What of the businesses themselves? Nobody is terribly concerned about the survival of McDonalds or Burger King, but how about the local restaurants we treasure? Recently Oakland, California instituted a high minimum wage. The San Francisco Chronicle reported
on the effects, “Oakland’s new minimum wage law has confused immigrant businesses in Chinatown, several of which have shut down because they can’t pay the new rate of $12.25 per hour.” Putting our local family businesses out of business will not only exacerbate the poverty problem, it will change the character of Tucson, and not for the better.
It might be useful to look at who we are talking about—who works for minimum wage and below (you can be employed below minimum legally in certain situations). The Employment Policy Institute has a breakdown
, “According to U.S. government data, in 2006 only 14 percent of minimum wage recipients were raising a family on the minimum wage. The remaining 86 percent were teenagers living with their working parents, adults living alone, or dual-earner married couples.” The average household annual income for a minimum wage earner is $46,000.
So how about that 14 percent, the people who are actually struggling? First, the good news is that two thirds of minimum wage workers get a raise beyond minimum in the first year, so they are not trapped where they are. For the rest, an affirmative step, according to EPI, would be for Arizona to pass a state level Earned Income Tax Credit law. With tight parameters, the people working minimum wage with dependents could get the financial assistance they need without destroying the incentive to work. They will get the help they need until they move on to a higher wage.
Most importantly, these workers will have the satisfaction and the dignity of becoming self sufficient.
I have no idea what motivates the SEIU or the PDA, but it sure isn’t helping the working poor.