The never-ending campaign for minimum wage increases is popping up in cities across America. Seattle recently approved a ramp-up to a $15 minimum wage. Just down Interstate 80, Richmond last week approved a $13 minimum wage implementation plan.
What would happen if a Solano County city pursued this?
Let’s use a pizza parlor as a model. In this parlor, “Joe” has a skill set limited to sweeping floors, and thus is worth $5 an hour to me, whereas “Sally” can sweep floors and run the cash register, so she is worth $10 an hour to me. If I am mandated to pay a minimum of $10 for a unit of labor, I will look for the maximum return. Thus, I will want another person who can sweep and run the register; since Joe can only sweep, he will be out of a job. In order to maintain my labor budget, I will remove employees and/or reduce hours, and implement processes to make them more efficient.
Let’s stand on the other side of the counter: Our pizza parlor sells a small cheese pizza for $5, and a large cheese pizza for $10. If they started charging $10 for either pizza because they “needed” to make $10 per pizza, would you still get the small pizza, or upgrade to the large?
In today’s economy, pressure is on to reduce costs, particularly labor. Countless California businesses can attest to the increasing hassle of hiring employees. Currently, most of California has a reported unemployment level of more than 10 percent. This indicates that the current supply of available labor exceeds the current demand for labor. If your local store has an overstock of product, do they increase the price to sell it?
Any wonderful government mandate must have exceptions. Under the Richmond mandate, businesses that pay less than 800 hours of employee wages over a two-week period will be exempt from the city minimum wage requirements (but still pay the state minimum wage). Additionally, Richmond businesses that “derive more than 50 percent of their income from transactions where the point of sale is outside the city” will be compelled to pay an “intermediate wage,” defined as the average of the city’s minimum wage and the state minimum wage.
Small-business owners: How easy would it be to track these metrics? If I deliver pizzas outside of the city limits, is that point of sale outside of city limits? Does our hypothetical pizza parlor have to start tracking each delivery, and prorate the delivery person’s wages accordingly?
Additionally, migration is a factor. If Richmond has a minimum wage of $13 and hour, and Dixon has a minimum wage of $10 an hour, many Dixon residents would be motivated to hunt for jobs in Richmond. A business in Richmond, as a buyer of labor, would have more selection of labor, and thus would be pickier. When prices rise, naturally or artificially, supply will inevitably increase.
I acknowledge that it is near impossible to raise a family on a minimum wage job; but here is the cold truth: minimum wage jobs aren’t supposed to; they are entry-level jobs. If a job seeker views entry-level jobs as their “forever” career and plans to support a family with it, they will be sorely disappointed.
If our goal as a society is to raise the price of labor, the most feasible method is to increase the long-term demand for labor. If the goal is to increase the labor participation rate, then remove restrictions and barriers. Those in favor of mandating and restricting what employers should pay for a job will find employers choosing not to participate in the labor market.
Brian Thiemer is chairman of the Solano County Libertarian Party. He can be reached at firstname.lastname@example.org.