A few days ago, we used supply-and-demand curves to illustrate how taxes reduce economic output.
Supply-and-demand curves also can be used to examine the impact of minimum wage laws on the labor market.
Workers understandably will be willing to supply more labor at higher wages.
Employers are just the opposite. They demand more labor when wages are low.
In an unfettered market, the interplay of supply and demand will result in an “equilibrium wage.”
But as you can see from the chart, if politicians impose a minimum-wage mandate above the equilibrium level, there will be unemployment.
Some folks, though, may not be overly impressed by theory. So how about empirical research.
Other folks, though, may prefer real-world examples rather than academic studies.
We’ve already looked at the bad results when the minimum wage was increased in Michigan.
Now we have some more unfortunate evidence from the state of Washington. Seattle Magazine has a story about a bunch of restaurants closing because of an increase in the minimum wage.
The article starts by noting a bunch of eateries are being shut down.
Last month—and particularly last week— Seattle foodies were downcast as the blows kept coming: Queen Anne’s Grub closed February 15. Pioneer Square’s Little Uncle shut down February 25. Shanik’s Meeru Dhalwala announced that it will close March 21. Renée Erickson’s Boat Street Café will shutter May 30… What the #*%&$* is going on?
Hmmm…so what’s changed. It’s not higher food prices. It’s not a change in dining preferences of consumers.
Instead, government intervention is having a predictable effect.
…for Seattle restaurateurs recently, …the impending minimum wage hike to $15 per hour. Starting April 1, all businesses must begin to phase in the wage increase: Small employers have seven years to pay all employees at least $15 hourly; large employers (with 500 or more employees) have three. Since the legislation was announced last summer, The Seattle Times and Eater have reported extensively on restaurant owners’ many concerns about how to compensate for the extra funds that will now be required for labor: They may need to raise menu prices, source poorer ingredients, reduce operating hours, reduce their labor and/or more.
An industry expert tries to explain the new reality of coping with higher costs.
Washington Restaurant Association’s Anton puts it this way: “It’s not a political problem; it’s a math problem.” …he says that if restaurant owners made no changes, the labor cost in quick service restaurants would rise to 42 percent and in full service restaurants to 47 percent. “Everyone is looking at the model right now, asking how do we do math?” he says. “Every operator I’m talking to is in panic mode, trying to figure out what the new world will look like.”
Well, we know what “the new world will look like” for many workers. They’ll be unemployed.
So you can understand why this issue is so frustrating. Politicians posture about helping workers, but they wind up displaying their economic ignorance and real-world innumeracy.
And innocent people pay the price, as shown in the Branco cartoon.
P.S. Walter Williams explains the racist impact of minimum-wage laws.
P.P.S. On a lighter note, here are a couple of additional clever cartoons illustrating the negative impact of minimum-wage mandates.
P.P.P.S. And this video is a must-watch on the issue.
P.P.P.P.S. Shifting to a different topic, I’m not quite sure this guy deserves to be in the Moocher Hall of Fame, but I’m glad he’s going to jail.
Champion golfer Alan Bannister, who played off a handicap of seven, was convicted of benefits fraud after being caught on camera walking around the course on his daily game. He even had a taxpayer-funded mobility car by claiming he was in too much pain to walk. …Inspectors discovered he used his mobility car – intended for people “virtually unable to walk” – to drive to the golf club to play with the “Sunday Swingers” and “The Crazy Gang” players, despite claiming he could barely walk 50 metres at a time. …The court was told Bannister dishonestly claimed £26,090.55 from 2007 until 2012 in Disability Living Allowance.
And while he’s only a borderline case for the Moocher Hall of Fame, he’s a perfect example of eroding social capital.
He’s a dirtbag who decided that it is perfectly okay to scam off taxpayers. When enough of his fellow citizens make the same choice, a society is in deep trouble.
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Minimum wage as currently exists is a disincentive to work.
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and it goes into effect April fools day…
isn’t that ironic………………………………
None of that will happen. Owners will simply accept working twelve hour days six days a week (typical of small restaurant ownership) and take great variability in income plus risk of failure and capital loss for ….. 3x the minimum wage for themselves. There are so many of these current and future restaurant owners. They are just hiding. They just need a few kind words of encouragement about how a restaurant can be a community service and what wholeness in your soul such service can bring.
Reblogged this on All Right On The Left Coast ™.
Now I wonder….Most of the supply for those types of jobs comes from young adults who are in school. I wonder if there was a way of decreasing that supply by offering incentives to those young adults to get other types of jobs. Leaving that unskilled labor to those who need it. For example, maybe making it mandatory for internships to be paid a minimum wage. Many companies who offer internships can afford to pay interns yet chose not to do so. I understand how this new minimum wage can affect american business, but coming from the restaurant industry myself I do to understand where the compassion for a higher minimum wage comes from. It’s just a thought I had; that if many of the college students who make-up a large portion of that supply were moved into other markets, I wonder if this would move the supply of labor enough, so that a more moderate minimum wage could work? What do you think?
[…] WAIT, THERE’S MORE… […]
Like you started off, earlier in the article, “taxes”.
THAT’S IT! Just like from the radio parody, years back, on the Michael Reagan Show with the plot of “Al Gore” playing off on “Do You Want to be a Millionaire?” (It was framed as: “Do You Want to be President of the United States?”) – Of course, the fictional “Gore” got it wrong (just as the REAL Al Gore got it wrong on everything, especially on “Global Warming”.)
The point is,
Yes, if you want to fix the economy, we can start by CUTTING TAXES! Period.
“Obamacare” IS an example of another TAX. Period.
As to Mr. William’s statement of minimum wages being racist, well – isn’t it the whole plan to make employing actual Citizens too expensive to be hired??? Isn’t it planned for most of us to be unemployed, starving, homeless, sick, tired, and without hope??? – There’s your slavery, front and center! So much for the false promises from the Fourteenth Amendment.