Ignoring reality of higher wages
Don BrunellDecember 3rd, 2015
The news is full of organized protests demanding a $15 minimum wage. Several cities across the nation have passed or are considering big hikes in their minimum wage.
SeaTac was the first in our state to pass the $15 minimum wage, followed by Seattle and the University of Washington. Washington, D. C. now has the nation’s highest “state” minimum wage at $10.50, followed closely by Washington state at $9.47.
Supporters say a $15 minimum wage will improve the lives of low-wage workers and boost the economy by putting more money in their pockets to spend in the local community.
But workers may not see the promised benefit to their bottom line. Consider the restaurant industry.
Some restaurant owners subject to the higher minimum wage are banning tips on the theory that tips, which formerly supplemented low wages, are no longer necessary or appropriate. That will put a big hole in workers’ pockets.
A national survey of 15,000 food service workers found that servers in Miami, Boston, and San Francisco reported the highest median tips per hour at around $13. The lowest—around $7—were in Minneapolis, Detroit, and Seattle.
There’s another problem.
Tips, which can amount to up to 70 percent of a server’s income, often go unreported to the IRS. In fact, the Internal Revenue Service estimates that $11 billion in tip income goes unreported each year.
As higher minimum wage laws shift servers’ income from tips to wages, that income now will be reported by employers, and Uncle Sam will get his cut.
There is another underreported aspect of some new minimum wage laws: the union exemption. Many ordinances passed to date, including SeaTac’s, specifically exempt employers from paying the higher minimum wage if they have a union contract. Many analysts believe that supporters like the powerful Service Employees International Union (SEIU) are pushing the higher minimum wage laws specifically to leverage employers into signing union contracts.
But union membership comes with union dues, money the unions spend to increase their political influence and power. Bottom line: Those dues come out of the workers’ pockets.
And finally, to benefit from a higher minimum wage, you must first have a job. And for many untrained young people, the $15 hourly wage is an unsurmountable barrier.
Look at it from the employer’s perspective.
The only thing that offsets the time and money it takes to train a young worker is they earn less than experienced employees. Once they get training and experience, they can move up the ladder and command a higher salary.
Why would an employer hire an untrained, inexperienced person for $15 an hour when older, more experienced workers are pounding the pavement looking for work?
The youth unemployment rate is more than double that of adults. Mandating higher wages will only make that situation worse.
More than half the counties in our state have unemployment rates above the national average—184,000 people are jobless. If they can’t find work at $9.47 an hour, how will they find work at $15 an hour?
Finally, we wouldn’t be talking about mandating a higher minimum wage if the economy were in better shape. In a strong, vibrant economy, employers compete for workers with higher wages and better benefits.
The answer is not to mandate higher wages, but to free private-sector employers from crushing taxes and costly regulations so they can expand and create the good-paying jobs millions of Americans want and need.
Don C. Brunell is a business analyst, columnist, and former president of the Association of Washington Business, the state’s oldest and largest business organization.