As Kansas City opens a $15 an hour wage mandate for public vote, news keeps coming in from around the world proving if you make labor more expensive than it’s worth, jobs will be eliminated.
A pizza shop in San Francisco went full progressive.
They decided they would pay their employees $15 to $25 an hour to work at a pizza shop. Then, they printed out new menus telling everyone about it and why they didn’t need to tip.
— Holly Potter (@htpotter) April 18, 2015
Then they jacked up the price of their pizza to $30 a pie so they could afford to be so awesome.
That was shortly followed by a lesson in basic economics when people stopped purchasing their overpriced food:
Sales at Gumper’s locations have plunged 25% in the last few months, forcing Gumper’s to close during lunch hours at some locations.
Wait a minute. First, they raise their prices, keep the product quality the same and then when things get rough, they close during one of the main times of day when people would actually want their product?
How did these guys stay in business so long?
Gumper admitted, “The necessity of paying people a living wage in the Bay Area is clear, so it’s hard to argue against it, and it’s something I’m really proud to be able to try doing. At the same time, I’m terrified of going out of business after 18 years.”
No, it really isn’t that hard to argue against it. It’s hard to argue against reality.
You simply say, “If I pay you more than you are worth, I will go out of business, then no one will have any wage, living or not.”
You say, “If you want to make a living wage, you have to work yourself out of an entry level position and into a management position.”
When you set the price of labor higher than it is worth, you will make jobs disappear, whether you are a proud social justice warrior or not.
It’s not just in San Francisco.
It’s happening in Seattle:
The loss of 1,000 restaurant jobs in May following the minimum wage increase in April was the largest one month job decline since a 1,300 drop in January 2009, again during the Great Recession.
It’s happening in Los Angeles:
Over the last 12 months through June, hotel jobs in the LA area have fallen by 2,200 (and by 5%), while hotel jobs in the rest of the state have increased by 2,400 (and by 1.4%). Reason? A year ago, the Los Angeles City Council legislated a $15.37 an hour minimum wage for hotel workers that went into effect on July 1 for hotels with 300 or more rooms, and will go into effect next July for smaller hotels.
And they are dealing with it in Europe too:
“Jobs fail to be created in a number of (eurozone) countries not because of a ‘lack of demand’ as often claimed,” Thimann writes, “but mainly because wage costs are high relative to productivity, social insurance and tax burdens are heavy, and the business environment is excessively burdensome.”
If the costs of new workers exceed the likely benefits in higher sales and profits, companies will hire less or not at all.
That is a lesson many in America fail to understand. Jobs will disappear and companies will hire less.
Need an example? As unions fight in cities across American to increase the minimum wage in fast food restaurants, touch pad menus continue to appear. The Show-Me Institute says minimum wage laws are in incentivizing unemployment:
Many businesses already have a financial incentive for installing more kiosks like the ones McDonald’s is introducing. According to the Harvard Business Review, “Taco Bell recently announced that orders made via their new digital app are 20% pricier than those taken by human cashiers, largely because people select additional ingredients. Chili’s, after installing self-service tablets, reported a similar increase in dessert orders. Cinemark theater’s new self-service kiosks have ‘had concession spending per person climb for 32 straight quarters.’”
Minimum wage laws jettison history and basic economics in favor of good-intentions.
Good-intentions are no match for reality. Reality is, you have bills to pay and those people have bills to pay. Reality is, if Kansas City votes to force business to pay more for labor than it’s worth, jobs will disappear there also.
Businesses need to make a living wage. There’s no law mandating how much a business is to make.
They either make a profit or they, like low-skilled jobs in areas with oppressive wage mandates, will just disappear.
Photo Credit: Annette Bernhardt/flickr