Saturday, January 26, 2019

Jon Miltimore: The Costs of NYC’s $15 Minimum Wage Are Already Visible

New York City’s minimum wage jumped more than 15 percent overnight on January 1, and employers are already cutting workers’ hours as a result.

CBS has the story.

Jon Bloostein operates six New York City restaurants that employ between 50 and 110 people each. The owner of Heartland Brewery and Houston Hall, Bloostein said the effect of the higher minimum wage on payroll across locations represents "an immense cost" to his business.

"We lost control of our largest controllable expense," he told CBS MoneyWatch. "So in order to live with that and stay in business, we're cutting hours."

A Terrible Way to Fight Poverty

Cutting hours was not Bloostein’s only option, one might say. And it’s true. But cutting hours was not the only option he took.

Bloostein also cut staff positions. For example, instead of being greeted by a host or hostess, customers are greeted by a sign. He also increased menu prices.

“[It] will cost more to dine out," Bloostein said. "It's not great for labor, it's not great for the people who invest in or own restaurants, and it's not great for the public."

Bloostein is just one restaurant owner, you might say. But he is not alone. A New York City Hospitality Alliance survey shows that 75 percent of restaurants said they planned to cut employees hours in response to the wage hike. Nearly half (47 percent) said they’d cut jobs.

The outcome is hardly a surprise. These are the signature responses to steep wage hikes forced onto businesses (those that manage to bear the costs and stay open, anyway).

However pure the intentions of New York politicians might be, the minimum wage will have a dire impact on those who can least afford it: young, poor workers who will not be afforded important job experience. It’s a terrible way to fight poverty, The New York Times (once) observed:

The idea of using a minimum wage to overcome poverty is old, honorable – and fundamentally flawed. It’s time to put this hoary debate behind us and find a better way to improve the lives of people who work very hard for very little.

Politicians, it seems, have trouble learning this simple fact. Last week, House Democrats proposed a bill to double the federal minimum wage to $15. (Perhaps they were inspired by Nicolas Maduro, who days before passed a 300 percent minimum wage increase.) And 22 states saw increases in the minimum wage in 2019.

We’ve seen time and again that the minimum wage harms those it purports to help, so why do such laws continue to be written?

Conflicting Incentives

The great economist Ludwig von Mises sheds light on the question.

“No politician is any longer interested in the question whether a measure is fit to produce the ends aimed at,” Mises wrote in The Ultimate Foundation of Economic Science.“What alone counts for him is whether the majority of the voters favor or reject it.

Politicians, Mises is saying, have incentives quite different from workers. And incentives matter a lot.

The authors of the best-selling book Freakonomics contend that “incentives are the cornerstone of modern life.” This rule applies to everyone, including “experts” who “use their informational advantage to serve their own agendas.”

Until voters recognize that politicians have incentives that are often quite different from their own, we’re likely to continue to see harmful legislation of this kind.

Jonathan Miltimore is the Managing Editor of His writing/reporting has appeared in TIME magazine, The Wall Street Journal, CNN, Forbes, Fox News, and the Washington Times. 

He previously served in editorial roles at The History Channel magazine, Intellectual Takeout, and Scout. He is an alumni of the Institute for Humane Studies journalism program, a former reporter for the Panama City News Herald, and served as an intern in the speechwriting department of George W. Bush. This article was first published HERE.


Anonymous said...
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So there were so many jobs that were "MacDonalds" jobs. ie they were so low paid that Restaurants could afford to employ two people where only one or none was necessary?
Oh dear that it may cost a few dollars more to dine out, if it means employees are paid a reasonable wage.....$15/hr in the "land of the free and the home of the brave"...dear oh dear...
Better to employ people at a decent wage than have then stooping and bowing to live off tips. Those that are no longer employed , ok tuff at the moment but hopefully they go and get a meaningful adequately paid a respectable and reasonable economy and employment situation should function.
Finally, half the states still has no minimum wage and more than a few states have $7/hr minimum....I guess on this thinking, if wages were $3/hr, imagine how many peasants (oops Freudian slip)...people could be given full employment.
Extremes of anything only lead to a nonsense....

Mervyn Cave said...
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Minimum wages are the single greatest barrier to get ahead. If your value to an employer is less than minimum wage how to you acquire the skills to be of greater value? You don't you join the demoralising dole queue clutching the worthless education diploma the government gave you. Everything useful in life I learned on the job and I was super lucky that employers not only trained me they were generous enough to pay me more than I was worth to them at the outset, with no need of action of the dead hand of politicians.