With Washington State looking to join California and New York in instituting a $15 minimum wage, it is important to understand the actual consequences of such a law. But rather than debating the projected economic impacts, let’s use an easier concept that everyone understands – self-interest.
Obviously, it is in the self-interest of the minimum wage (and near minimum wage) worker to be paid more money. But the real issue is where does that extra money come from? The proponents of the $15 minimum wage law would have you believe it comes solely from the pocket of the business owners, in the form of less profit. Even if the business owner has to raise prices to stay in business, these extra wages are still supposed to come from the owners. They maintain the illusion that this is the only source of the higher wages, because it is the only way that the worker will actually benefit from a mandated higher wage.
But there are several other possible sources for the wage increase. Some employers may offset the increase with cuts to other benefits they currently give, such as paid vacation or sick leave or health care, resulting in no real advance in pay. Others, such as some Seattle area restaurants have done, will raise their prices but institute a no-tipping policy, leaving the employees in many cases earning even less than before. They may just cut hours, leaving an employee who worked 30 hours at $10 with 20 hours at $15. While they may have to work less hours to earn the same wages (assuming they were not one of the employees laid off completely), they find themselves under pressure to work that much faster/harder.
The other recourse employers have is to not pay the minimum wage at all. They might find that the investment in machines to replace $15 an hour workers makes much more sense. They might simply do without that worker doing less than essential tasks, like greeting or sweeping up. They might move their business to another state or another country where labor costs are cheaper. For example, thousands of jobs have moved outside the Seattle city limits since they instituted their new minimum wage law, and an earlier, much smaller increase in the Washington State minimum wage led one company canning asparagus in Eastern Washington to move their entire plant to South America. Being out of work from a $15 an hour job is certainly no better than being out of work from one that pays less than $10.
So which of these alternatives is the low wage worker likely to get? As much as they would like the business owner to foot the bill, the employee is not the one who makes the decision – the business owner is! And the business owner, in their self-interest, will largely choose to let the employees pay for the mandated $15 minimum wage, because in America (at least for now), business owners still have the freedom to make that choice.
[photo credit: gavran333, depositphotos.com]