I just caught an interesting article from the American Enterprise Institute that should give business owners as well as taxpayers pause. There have been several leftward city councils who have passed a $15/hour minimum wage such as San Francisco, Seattle, and most recently Los Angeles.
The problem with a $15/Hour minimum wage? It’s impossible to sustain:
Every political season, Democrats argue for higher minimum wages. Republicans respond by citing all of the evidence that higher minimum wages are harmful. Democratic voters get charged up and swing voters conclude that Republicans are heartless. It is the gift that keeps on giving for Democrats, but the curse that keeps on afflicting those below the poverty line who lose their jobs because of it.
Though Hillary Clinton has made it clear that she is going to play this game, much of the action is coming from around the country, where America’s progressive mayors have taken this form of government price-setting to new heights. In Los Angeles, Mayor Eric Garcetti recently signed legislation that would raise the minimum wage in the city to $15 by 2020. And this move in Los Angeles comes on the heels of Seattle’s and San Francisco’s adoption of the same policy.
The evidence is clear about whether raising the minimum wage is an effective way to help poor people: It is not.
As the chart shows, if every dollar of U.S. corporate profits were allocated to America’s employees, the effect would be to add a bit more than $7 to the average wage. The chart adds interesting perspective to the new policy in Los Angeles. The difference between the $15 Los Angeles target and the federal minimum wage of $7.25 is $7.75. At $7.57, the current value of the expropriationsubsidy is slightly lower. Mayor Garcetti’s minimum wage legislation has, it seems, taken economic populism to its logical extreme—and beyond.
“if every dollar of U.S. corporate profits were allocated to America’s employees, the effect would be to add a bit more than $7 to the average wage” versus “The difference between the $15 Los Angeles target and the federal minimum wage of $7.25 is $7.75.”
On a national basis, a $15 Minimum wage doesn’t just remove all traces of corporate profits, it creates a deficit of $.75 an hour. The simple economics of it don’t work.
Regionally, it has the potential of shifting a significant number of portable jobs that can be done elsewhere out of those areas. If such a thing came to pass nationally, I think we have the potential to see job automation and job exporting at a level never considered.
And that’s a bit of the problem with South Dakota’s open-ended minimum wage law. There’s no cap. The sky is the limit.
If our open-ended state minimum wage law survives the inevitable court challenge that will come the first time the inflationary increase kicks in, state business owners – the ones who give the jobs to people – are going to have to make some hard decisions over what’s affordable to do in the course of business, and what isn’t.