OPINION:
A new report from the Congressional Budget Office (CBO) shows that 3.7 million workers could lose their jobs at the hand of a $15 federal minimum wage, while only a third as many would be lifted out of poverty. It’s a tradeoff few Americans would be willing to entertain, yet all but three Democratic presidential hopefuls continue to enthusiastically support the measure. Between the House and Senate, 8 in 10 sitting Democratic representatives have signed on to legislation that would raise the federal minimum wage to this insupportably high threshold.
Those who believe a hike in the federal minimum wage delivers a benefit at no cost would do well to look at all the data.
During President Obama’s 2014 campaign, Democrats supported increasing the federal minimum wage from the current $7.25 an hour to $10.10 an hour. At the time, the same CBO report estimated that the shift would cost half a million jobs while lifting one million workers above the poverty threshold. The economy, still recovering from the Great Recession, could not have absorbed the higher wages. However, due to natural wage growth and some of the lowest unemployment rates the country has experienced in decades, the impacts of a $10 wage today are more modest: 100,000 job losses under the worst-case scenario.
It’s the Achilles’ heel of the left’s labor proposals: Going too high too soon. Even as businesses begin voluntarily offering starting wages at or above $10 an hour, there remains little evidence to justify Democrat’s policy shift from $10.10 to $15.
The yearly average Consumer Price Index, a measure that reflects changes in the price of goods and services, has increased 7.5 percent since $10.10 was first proposed in 2014. Similarly, inflation has tracked at about 8.2 percent during this time. Yet the jump from a proposed $10.10 to $15 hourly wage represents a 48.5 percent wage increase.
And doing away with the credit for tips, as federal legislation proposes, means restaurant server labor costs will jump by 600 percent. Think that will go down without consequences? It’s just another cost of doing business that seems to be unimpressive to a group of legislators who — despite their insensitivity to business realities — had no problem in stiffing their interns.
Given the absence of supporting data, it should surprise no one to learn how the Service Employees International Union (SEIU) — one of the most prominent groups promoting a $15 wage floor — arrived at their preferred value. “I would say that it was a pretty scientific process,” quipped SEIU organizer Kendall Fells in an interview. “$10 was too low and $20 was too high, so we landed at $15.”
This is the degree of intellectual bankruptcy allowed to pass for good economics in the labor movement.
Raising the minimum wage to $15 means eliminating the first rung on the employment ladder. It’s not the same ladder used by college graduates. For the almost 1,500 individuals who drop out of high school every single day, being unable to find a minimum wage job often means they cannot find a job at all. A recent study from the Mercatus Center found that rising state and local wage floors are the primary cause of lower teen employment rates. Higher base pay means that employers must be more selective in their hiring practices, obviating the need for more training time. The result drives businesses to choose those with experience over young individuals who need basic work experience and exposure to the invisible curriculum of work. If basic service jobs are no longer created, where do these individuals find an entry point to employment?
Democratic legislators should look at another experiment that recently took place in the city they now call home. When the District of Columbia passed an initiative eliminating the wage credit for tipped income, it was the District’s bartenders and servers who petitioned the City Council and put a stop to the policy. Under current law, tipped workers earn a base wage of $3.89, while the remainder of their income is comprised of tips. Those who are employed under this pay structure know that it’s common to earn $20, $25, or even $30 an hour once tips are included. The District’s bartenders and servers knew that shifting to a flat $15 hourly wage would mean employers faced with a 285 percent increase in base wages would result in significant job losses, more automation and self-service. The evidence from other cities who have tried to ignore economic realities in running a business was clear to the D.C. servers.
In light of the overwhelming evidence against a federal $15 minimum wage, one question should be posed to every Democratic legislator who supports the measure: Are you smarter than a D.C. waitress?
• Richard Berman is the president of Berman and Co., a public relations firm in Washington, D.C.
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