Hey big corporations, D.C. doesn’t want your lousy jobs
Jobs? We don’t need no steeeenking jobs!
That could be the motto of the D.C. City Council. Last week, the council voted to impose a “super-minimum wage” on large businesses in the district, which would raise the minimum wage from the standard $8.50 an hour up to $12.50 an hour for larger employers. I’m sure this makes a lot of sense to liberals—hey, people working jobs at Wal-Mart will make more money!–but this is actually terrible, especially for those at the bottom of the economic ladder.
That’s right, increasing the minimum wage would actually hurt employment. It’s not a huge leap of logic. You’re a business, with a budget for labor costs. Now, your labor costs increase. You have a choice: either pay these higher costs, and watch your profit margins shrink, or cut back hours and lay off workers to stay competitive.
Some will claim that businesses like Wal-Mart, Home Depot and Macy’s can easily absorb the higher cost of labor. Maybe they can. I’m not in a position to weigh in on these companies’ internal decisions. But that ignores the central purpose of any for-profit enterprise: to make money for shareholders and the people who have put their own time, money and resources into making it work. By raising the price of labor, the D.C. Council has essentially priced thousands of local residents out of work. Mark Adams at the Mercatus Center writes in a recent op-ed:
Minimum wage workers tend be young and unskilled. Less than half of workers under the age of 25 are currently employed and many rely on low-paying opportunities to get their first break. The majority will earn a raise within a year, but they currently lack the experience and skill to compete for higher paying jobs. Raising the minimum wage makes it harder for these inexperienced workers to find a job, because businesses will either eliminate positions or choose to hire someone with more experience at the higher mandated wage. Minimum wage jobs could also be a pathway to retraining for workers facing a mismatch between their skills and available openings. A higher minimum wage would limit such opportunities, and that’s particularly dangerous during this historically slow recovery.
It would be nice to think that anybody could be paid any rate, but that’s just not the case. People are paid according to how much value they bring to the company, and how common that value is on the open market. And while it might also be nice to think that Wal-Mart floor workers and greeters bring the most value, just about anyone can do that job with minimal training or skill, so there is a huge pool from which to draw. A pool that includes Anacostia, a part of DC where unemployment two years ago was hovering around 20 percent, twice the district’s average, and where Wal-Mart planned to place one of its new stores.
But it’s not just on the jobs front that the working class get the short end of the stick. It’s also as consumers. Thanks to economies of scale, Wal-Mart can charge lower prices for goods and still make a good profit. It’s even 20 percent cheaper than Amazon. Yet with this new law, Wal-Mart is reconsidering opening stores in D.C. at all. This means that, instead of getting lower prices for goods, lower-income D.C. residents will have to pay more for food, medicine, clothing and other things they need.
If squeezing big corporations this way hurts the poor, who benefits? It may be organized labor, which the Washington Post notes has been behind this push. After all, the bill exempts those companies with a unionized workforce. Section 4 (e) states:
The provisions of this section may be waived by the written terms of a bona fide collective bargaining agreement.
This bill is less about paying a “living wage” as it is about cutting out labor unions’ competition. In that regard, they act just like large corporations.
If the council wants to help out D.C. residents with more job opportunities and cheaper prices, they should have killed this bill. Instead, they helped out union management. So now the question is, why does the council hate poor people?