Mere weeks ago MRCTV’s John Romero reported on socialist Bernie Sanders’ campaign team smacking into the brick wall of economic reality after pushing for a $15 per hour minimum wage and hefty benefits. Amazingly, their hours were cut to 70 percent of their former collectivist-pushing glory.
And it appears that the collectivists in New York have a similar lesson in economics unfolding for them right now, as The Wall Street Journal and Reason both report that the city-wide mandate of $15 per hour is – shocker! – forcing employers to raise prices and cut jobs.
More than six months after the $15 minimum wage went into effect in New York City, business leaders and owners say the increased labor costs have forced them to cut staff, eliminate work shifts and raise prices.
And this is not merely correlative. It’s causative.
Many business owners said these changes were unintended consequences of the new minimum wage, which took effect at the beginning of the year.
Indeed, the cuts in staff and hours, and the increases in costs passed on to consumers come at a time of tremendous economic growth. This should be an era in which more New York businesses are opening, more people are enjoying new entry-level jobs in the city, and hours are available, not the opposite.
But, as Billy Binion reports for Reason, Thomas Grech, the president of the Queens Chamber of Commerce, explained that over the past six to nine months, small businesses have been closing… because of the wage mandate:
‘They're cutting their staff. They're cutting their hours. They're shutting down,’ he said. ‘It's not just the rent.’ Businesses with 11 or more employees were required to raise the minimum wage to $15 on December 31, 2018, while businesses with 10 or fewer workers will have to do so at the close of this year.
And Binion notes that this politically woven blanket has, in particular, smothered jobs in the dining industry, wiping out waitstaff positions and hours.
(T)hose pay increases disproportionately impact the restaurant industry, which operates on snug profit margins. Waitstaff in New York City currently collect a tipped wage, which sits below the mandatory minimum and allows workers to make up the rest—and sometimes much more—in tips. If the hourly average falls below the minimum wage with tips included, employers are required to make up the difference.
And guess what that’s been doing?
Binion explains that a recent study conducted by the New York Hospitality Alliance reveals the answer.
According to the 324 full-service dining establishments surveyed, 75 percent plan to cut hours and 47 percent forecast eliminating some positions entirely in response to the minimum wage increase. What's more, 87 percent said they would need to raise prices to stay above water.
In fact, all of their empty pandering follows a dirty class-envy path going back to Jean Jacques Rousseau, who, in his 18th Century “Discourse on Inequality”, railed against private property and claimed that all of the inequities in France were caused by “inequality”, which was, in turn caused by evil private property.
The first man who, having enclosed a piece of ground could think of saying, ‘this is mine,’ and found people simple enough to believe him, was the real founder of ‘civil society’ (which he despised). How many crimes, wars, murders, miseries, and horrors would not have been spared to the human race by one who, plucking up the stakes, or filling up the trench, should have called out to his fellow men, ‘Beware of listening to this imposter! You are undone if you forget that the earth belongs to no one, and that it’s fruits belong to all!’
That coming from a man who sent all of his five children to the government-run Foundlings Home, then blamed society for missing the chance to be a father, and he never realized that the concept of property rights is connected to self-ownership and is a system worked out to allow people to interplay with others in a respectful manner and avoid conflict.
Half a century later, Karl Marx would echo the anti-property, pro-envy sentiment not only with his “Communist Manifesto”, but also with the popular and mistaken notion of the “Labor Theory of Value”, claiming that the value of a product was determined by the labor that went into it.
But real economists, such as those of the Austrian School, and anyone who uses common sense to think this through, know that the consumer is the final arbiter of value and the final person who determines whether he or she will pay for something. Hence, a contemporary Rousseau or Marx could work on, say, a sculpture all day, but if a customer is unwilling to pay for it, it is worthless on the market.
This is important. Market freedom allows employers and employees to respond to consumer preference in a natural way, allowing resources to flow to where consumers want them and allowing business to trend towards fulfilling what the consumers show they want – and away from what they don’t want. If consumers are unwilling to pay beyond a certain level for certain services, political gerrymandering to push the price of those services higher will not help the service provider. It will merely drive the consumer away and destroy the job. Likewise, if the consumer is willing to spend that little bit extra on something made artificially more expensive, that’s money which would normally have gone elsewhere, and so someone unseen is harmed by the political intervention in the market.
DeBlasio and company cannot avoid economics, and economics dictates that gangland-style government threats against business owner to pay a certain wage are really threats made against consumers to pay a higher price.
They kill jobs and consumer opportunities to spend their money on other things. They run counter to the entire history of mankind’s endeavors to invent, divide labor, trade, save, and invest.
But what of the claim that minimum wage workers are unable to live off their earnings? Surely that trumps all else and excuses unethical political force and government insertions into private personal business agreements?
This is a popular bogey man that misses important facts. As many economists have pointed out, the overwhelming majority of minimum wage workers are not trying to “live” off the work. They typically are young – teenagers and college-age – low-skilled people looking to earn extra or possibly get a foot in the door as they look at their future. And egomaniacal political commands over how much employers must pay them for their low skills wont’ help them. It will destroy the entry-level jobs, or, as has occurred in California, replace the labor with machines because the cost of the labor has been pushed so high.
If DeBlasio, Ocasio-Ortez, and Sanders wanted to bother, the evidence is all around them. Heck, decades ago, the feds had to create an exception to the minimum wage law for Puerto Rico. Because so many low-skilled workers lived there, and their skills couldn’t fetch the price the feds dictated, the island was sent into an unemployment tailspin.
If these – or any -- politicians want to make sure employees earn a certain amount, let them act peacefully and enter the market to offer those wages, not force others to behave as they command.
When they do the latter, it destroys jobs and opportunity, hurts consumers, and shows us who the real lumbering giants are.