Feel-good minimum wage hike is bad economic policy
Break out your long-range wall calendar, grab a red Sharpie, and put a big fat circle around Oct. 15, 2023. That's the special day when all of Connecticut's workforce will be making a minimum of $15 per hour.
Every dishwasher, cashier, burger-flipper, lifeguard, street-sweeper, lunch lady, ticket taker, movie projectionist and grocery bagger will pocket $600 — minus taxes, of course — for a 40-hour work week. Don't misunderstand me: Every single job has its own distinct level of dignity, and all those who get up every day and break their backs to put food on the table should be proud of what they do.
However, by drastically increasing the minimum wage, you're essentially killing business and jobs.
By a vote of 85-59, the Democratic majority in the House passed the first minimum-wage bill since 2014. If it passes in the Senate (I'd be shocked if it didn't), it heads to Gov. Lamont's desk for his signature. What Hartford Democrats don't seem to comprehend (or refuse to admit) is that the negative repercussions from this bill will shake Connecticut's workforce to the core.
Other cities and states have signed off on the wage increase and the results are less than spectacular. Economists at Harvard Business School examined restaurant closures in the San Francisco Bay Area and they found that a $1 increase in the minimum wage led to a 10 percent increase in the likelihood of a restaurant closing. According to a recent article in Forbes Magazine, its estimated California will lose approximately 400,000 jobs by 2022 when its $15 minimum wage is completely phased in.
New York City's minimum wage jumped more than 15 percent overnight on January 1 and employers are already cutting workers' hours as a result. Retail and food service employees are hit especially hard by mandated wage increases. When the restaurants and store fronts disappear, what will these people do? Speaking with one local legendary restaurant icon this week — I won't mention his name, but my hint is " I coulda been a contender" — he was adamant that he'd love to pay employees more, but it's not business practical. For many Connecticut establishments, it's business impossible.
Think of it this way: You have five employees at a local bakery and they're all making $10 an hour. If you bump all five salaries to $15, the bakery owner will now be saddled with a minimum hourly payroll increase of $25. Multiply that by eight hours a day and now this bakery must come up with an extra $200 per workday. That's $1,000 extra a week, $52,000 extra a year.
And these numbers are just for the lowest-earning company workers.
Compensation for managers and supervisors will presumably go up in proportion to the mandated raises given to lower-level workers. When the minimum wage goes up, everything goes up — workers' comp and payroll taxes, for example. Small business will be forced to raise prices or cut workers.
If raising the minimum wage is such a good thing, why just raise it to $15? Why not $25 or $50? Is the minimum wage an entry-level salary or is it a living wage? At $15 an hour, it's neither. A family of four will struggle mightily to live on that income, while most businesses can't make a profit paying delivery boys 15 bucks an hour to sling pizza. It's a losing proposition for everyone.
After 2023, the minimum wage would be hooked into the Employment Cost Index, which is a measure of wage-growth calculated by the Federal Bureau of Labor Statistics. So, if the index goes up 2 percent then the minimum goes up 2 percent. If the index goes down, the pay remains constant. By the year 2030, Connecticut's minimum wage will be closer to $20 than $15. How can a fast-food restaurant pay teens close to $150 a day to serve milkshakes?
If you think I don't get the struggles of low-paid workers, you would be wrong. My first full-time radio job was an overnight gig paying $5 an hour. One baseball offseason, I drilled water wells in Western Australia for $50 a day. When I started out as an actor, I did mostly background jobs, working 20 hours and getting paid less than the cost of the subway fare. In my first year with the St. Louis Cardinals, I was paid $700 a month! That comes out to about $2.20 an hour.
In summary, raising the minimum wage in this manner will result in: increased layoffs; more work for those who remain; more people on state aid; fewer entry-level learning jobs; acceleration of artificial intelligence technology to replace human workers; outsourcing jobs to foreign countries when feasible; and increased consumer costs.
Be careful what you wish for, Democrats, you just might get it.
Lee Elci is the morning host for 94.9 News Now radio, a station that provides "Stimulating Talk" with a conservative bent.
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