New York State Tipping the Scales to Job Loss by Raising Minimum Wage

Economics 101 - Lessons Already Learned the Hard Way

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The idea of minimum wage sounds fantastic.  Everyone making at least a certain amount of money looks great on paper.  Unfortunately, that isn’t always the case.  Economics just isn’t that simple.  That money has to come from somewhere, after all.

Not that the state of New York seems to be acknowledging what cities have learned the hard way.  From USA Today:

New York state will gradually raise the minimum wage for fast-food workers to $15 an hour — the first time any state has set the minimum that high.

Gov. Andrew Cuomo’s administration formally approved the increase Thursday, a move the Democratic governor announced at a labor rally with Vice President Joe Biden. Cuomo said he would work to pass legislation setting a $15 minimum for all industries, a promise that comes as more and more cities around the country move toward a $15 minimum wage.

“Every working man and woman in the state of New York deserves $15 an hour,” the governor told the enthusiastic crowd of union members. “We’re not going to stop until we get it done.”

Biden predicted the $15 wage for fast-food workers would galvanize efforts across the country.

“You’re going to make every single governor in every single state in America look at themselves,” he said at the rally in New York City. “It’s going to have a profound impact.”

He said he and President Barack Obama remain committed to raising the federal minimum wage to $12 an hour.

The wage increase for fast-food workers in New York will be phased in over three years in New York City and over six years elsewhere in the state. It will apply to some 200,000 employees at large chain restaurants.

So far, Los Angeles, Seattle, San Francisco and the California cities of Oakland and Berkeley have approved phased-in increases that eventually will take their minimum wage to $15 an hour, or about $31,200 a year.

Of course, what isn’t mentioned are how many places are laying off employees due to that minimum wage increase.  Let’s face it folks, if a company only has so much money coming in, and they have to raise their wages, they’re going to have to make another decision somewhere along the line.  That means either raising prices, or cutting costs.  Since most costs are fixed to some extent, that means labor gets cut.

From an earlier piece Same Page Nation did on raising the minimum wage:

Vic Gumper, a pizza shop owner in San Francisco is proof that is a safe assumption. He voluntarily raised the wages of his workers to $15 – $25 an hour, which meant he had to increase the cost of his product.

The customers responded:

Gumper has also earned kudos from patrons for his innovation, but some have recoiled from paying $30 or more for a pizza. He has seen a 25% drop in sales over the last few months and has had to eliminate lunch hours at some locations.

“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,” he said. “At the same time, I’m terrified of going out of business after 18 years.”

Re-read that last sentence.

It isn’t hard to argue against it when it’s putting you out of business. The argument is right there in front of you.

Raising wages sounds great…until you realize that some of those people making minimum wage now will be making zero wage afterward.

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