Right now, all the candidates for President from the Democrat party are competing with one another to see who can buy the most votes using taxpayer money. One popular Democrat policy to buy votes is to raise the minimum wage. Democrats reason that minimum wage increases are great, because workers will have more money to buy stuff. What could go wrong?
Well, I want to talk about this policy from a theoretical point of view, then give an example of how it works in practice.
Abstract from a National Bureau of Economic Research study:
We estimate the minimum wage’s effects on low-skilled workers’ employment and income trajectories. Our approach exploits two dimensions of the data we analyze. First, we compare workers in states that were bound by recent increases in the federal minimum wage to workers in states that were not. Second, we use 12 months of baseline data to divide low-skilled workers into a “target” group, whose baseline wage rates were directly affected, and a “within-state control” group with slightly higher baseline wage rates. Over three subsequent years, we find that binding minimum wage increases had significant, negative effects on the employment and income growth of targeted workers.
[…]Over the late 2000s, the average effective minimum wage rose by 30 percent across the United States. We estimate that these minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point.
That comes out to 1.4 million workers who lost their jobs, thanks to minimum wage mandates.
Why does it hurt young and unskilled workers most? Because those workers don’t produce as much as older, more experienced workers. So, if all the salaries go up, employers keep the most experienced employees and lay off the youngest, and least experienced employees. This is why the youth unemployment rates of socialist countries in Europe are so much higher than the overall unemployment rate. And just to be clear, minorities are disproportionately harmed by minimum wage laws, since they are the ones who are often trying to move up through those entry-level jobs.
Here’s an example of how this works in reality, from San Francisco, a Democrat-run city.
ABC News reports:
San Francisco’s minimum wage is currently $11.05 an hour. By July of 2018, the minimum wage in San Francisco will be $15 an hour. That increase is forcing Borderlands Bookstore to write its last chapter now.
[…]Borderlands was turning a small profit, about $3,000 last year. Then voters approved a hike in the minimum wage, a gradual rise from $10.75 up to $15 an hour.
“And by 2018 we’ll be losing about $25,000 a year,” he said.
It’s an unexpected plot twist for loyal customers.
“You know, I voted for the measure as well, the minimum wage measure,” customer Edward Vallecillo said. “It’s not something that I thought would affect certain specific small businesses. I feel sad.”
That was in 2018, but strangely enough, Democrat voters haven’t learned their lesson. They still think you can vote people more money, and not ask where the money is coming from.
Shawn sent me this story about Seattle, another Democrat-run city.
Restaurants Unlimited, a Seattle-based chain with restaurant locations in 47 US cities, announced on Sunday it was seeking Chapter 11 protection, citing “progressive” wage laws.
The company, which has operated since the Lyndon Johnson Administration, said rising labor costs—part of a national trend of government-mandated minimum increases—were part of its decision.
“Over the past three years, the company’s profitability has been significantly impacted by progressive wage laws along the Pacific coast that have increased the minimum wage,” Chief Restructuring Officer David Bagley said in court filings, The Seattle Times reports. “As a large employer in the Seattle metro market, for instance, the company was one of the first in the market to be forced to institute wage hikes.”
[…]BLS data show that New York City experienced its sharpest decline in restaurant jobs since 9/11 following its passage of a $15 minimum wage law. In California, a local newspaper recently detailed how an entire business district virtually disappeared following the city’s aggressive minimum wage push.
Restaurants Unlimited’s announcement came a day before the Congressional Budget Office released a report estimating that a House bill designed to raise the federal minimum wage to $15 an hour would cost 1.3 million jobs.
Now, you might say to me “But Wintery, Democrats are the party of the little guy, why would they vote for something that would leave workers unemployed?” And there are two answers to that. First, Americans who work for a living tend to not look to the government for support. Second, Americans who work for a living tend to dislike when their taxes are raised to pay for people who aren’t working. Democrats are the party of higher taxes and bigger government. They always oppose letting people keep what they earn, and they always want the government to take free market solutions to health care, etc. so they can use the provision of health care to buy votes. So for them, kicking 1.3 million people out of work is a benefit.
When it comes to economics, we know what works. Trump cut taxes, and unemployment for all races is at a record low. If you want to reverse that, and have more people unemployed, living off taxpayer’s, then vote for Democrats.