Over the weekend, lawmakers and labor unions in California, the nation’s most populous state, reached a tentative agreement to gradually raise the minimum wage to $15 an hour over the course of the next several years.
Democratic Gov. Jerry Brown had opposed prior legislative proposals over the issue, but finally acquiesced after labor unions garnered enough support last week to qualify an initiative for the Nov. 8 ballot. The deal still has to go through the state legislature, but most anticipate legislators will approve it, thus avoiding the costly campaigning that would result from a squabble at the ballot box.
California’s compromise comes as part of a growing national movement to hike up minimum wages across the county. Indeed, over the past two years, a whole host of states and cities have rapidly pushed through legislation to raise their base pay, likely in response to President Obama’s repeated calls for higher wages.
Twenty-nine states have minimum wages that exceed the federally mandated $7.25 per hour. Heading into the 2016 election, the issue remains hotly contested and politically potent, with Republican presidential candidates in fierce opposition to, and Democratic candidates in strong support of, a dramatic increase in the federal minimum wage.
While many cities have forced local employers to pay artificially higher wages, the issue remains far from settled. Just last month, for instance, Alabama Gov. Robert Bentley signed a bill prohibiting Alabama towns from increasing their wages above the state’s, a move that came in response to the Birmingham City Council voting to raise their city’s base pay to $10.10 an hour.
In stark contrast to the reaction from California, many have since decried Alabama’s bill (Hillary Clinton’s campaign even characterized it as “disturbing“). Yet while opposition to wage hikes may be politically unpopular, more states should consider adopting laws like Bentley’s before it’s too late. As California’s deal demonstrates, the “fight for $15” is moving beyond just cities and towns. It now has the power to influence policy at the state level.
Jobless in Seattle
My opposition to minimum wage increases comes as a direct result of my own experience searching for jobs as a new resident of Seattle, Washington, a city that currently has one of the highest minimum wages in the nation. In June 2014, the Seattle City Council, composed of just nine members, unanimously voted to increase the city’s base pay to a whopping $15 an hour, to be gradually implemented over the course of several years.
On January 1, 2016, the newly mandated minimum wage rose to $13 for larger companies (those that have more than 500 employees in the United States), and $10.50 for smaller employers (those with fewer than 500 employees in the United States). On top of this, Washington state law now requires businesses to adhere to this minimum even for tipped workers, a rule that only six other states have on the books.
In December, I found myself needing a break from college, for a variety of reasons. So at the close of last semester, I decided (rather impulsively, as young people are wont to do) to take my spring semester off from the College of William and Mary and move out west to try my luck in Seattle, a place I had only visited once before.
My parents, although grateful to have one less semester of ridiculously high out-of-state tuition to pay for, let me know that I’d need to fund the venture myself. I had secured an internship in the Seattle area, but it was unpaid, so I knew I’d have to find additional part-time work very quickly.
Having a combined two years of serving experience and close to five years of total experience in the customer and food services industries (which is literally as much as you can ask for from a 20-year-old college student), I assumed I’d be able to find a restaurant gig in no time. So, after reassuring my parents all would be well in the financial department, I boarded a plane in Philly a few weeks later and made the move.
Yet seven weeks and more than 70 job applications later, I still have yet to land a part-time, minimum wage job. I’ve spent the majority of the last two months stalking online job sites and entire days traversing the various neighborhoods of Seattle, filling out applications and inquiring about job opportunities at any restaurant, coffee shop, retail store, or other service-oriented establishment I can find.
Having squandered all of the money I had saved to get myself through what I thought would be a brief job-hunting period, I now find myself faced with the reality that if I don’t find work very, very soon, I’ll have to cut my break short and move back to the East Coast.
Higher Wages Mean Higher Stakes
At first, I was utterly dumbfounded by my lack of success, and figured only bad luck was to blame. After all, I had been hired at every single one of my past serving jobs within only a day or two of searching and applying. I’d have to find something in Seattle eventually, I thought; I’m young, competent, and college-educated, and serving is by no means a highly skilled occupation that requires degrees or extensive training. I know how to make a good impression with prospective employers, and I already have years of experience in the food services industry. What more could these people want?
But soon enough it became clear, through talking with potential employers and local college students also trying to find work, that my failure to land a job was likely due, at least in large part, to Seattle’s absurdly high minimum wage.
Employers, especially in the restaurant and food services industries, are far less willing to take chances on who they hire with so much money on the line. I was shocked to learn that some restaurants—comparable in quality to the ones that hired me with little or no experience on the East Coast—here required a minimum of three to five years of restaurant experience, even for support staff positions like hosts and bussers. I had multiple managers glance at my resume, see that my past jobs were seasonal or temporary, and tell me upfront that unless I could commit to at least a year of labor, they simply wouldn’t hire me, despite my qualifications.
Contrast this with my past experience working in Pennsylvania and Virginia, states that have a minimum wage of $7.25 per hour for non-tipped workers and a base pay of $2.13 per hour for positions that do receive tips. To the uninformed observer, this situation looks a lot worse than the progressive system Washington has put in place, and admittedly, after taxes most of my paychecks came out to little more than $0.
But in reality this wasn’t an issue, because the tips easily made up for the hourly wage I was missing. Working 30 hours a week, I was able to bring home around $500 per week, which translates to about $17 per hour and $26,000 a year. According to the Foundation for Economic Education, this is just about enough to keep a family of four above the poverty line. That’s only part-time work. A full-time server in your average successful restaurant would be able to make even more than that.
Restaurateurs in states with the $2.13 per hour minimum wage requirement have much more opportunity for variety in their hiring practices, for the cost to train someone is little, and the tip-based salary incentivizes individual employees to improve on their own while allowing the business to keep most of its profits. They can usually hire year-round, and can afford to choose from a much more diverse applicant pool. This is likely why I was able to secure my first restaurant job, when I was 18 years old and had no prior serving experience, as a summer employee in a busy Mexican restaurant.
Even for other industries dominated by minimum-wage jobs, such as retail, maintenance, construction, and transportation, a $7.25 hourly rate allows for similar hiring diversity, and also enables a company to take on twice the amount of employees as it would be able to in a $15 minimum-wage state. It should surprise no one, for instance, that nearly all of the states with the most minimum-wage employees are in the South, an area where only two states—Florida ($8.05 per hour) and Arkansas ($8.50 per hour)—have minimum wages above the federally mandated $7.25.
Given this, it makes sense that Seattle employers forced to pay the new minimum wage even to tipped employees only feel comfortable hiring highly qualified prospects who can prove on paper they’ll be a safe long-term investment. These restaurateurs and store managers don’t want to risk hiring a relatively inexperienced young adult they’ll have to spend precious time and money training, and who may easily grow complacent in the job once he realizes he’ll get paid $13 an hour no matter the extent of his stay or the quality of his job performance.
Who Makes the Minimum Wage?
Higher minimum wages favor people who have already made a career out of these jobs—or, in other words, the very people minimum wage jobs are not intended for.
Political pundits and proponents of minimum wage increases predicate their arguments on the false notion that the majority of minimum wage-workers are poor breadwinners who depend exclusively on their jobs for survival. Indeed, to garner support for reform, the Left often cites the fact that a family of three or four cannot live on the $15,080 annual income a full-time employee theoretically makes with the current federal minimum wage of $7.25 per hour.
Democrats frequently tout this point and deploy their new favorite term “living wage” to purposefully obscure the reality that most minimum wage workers do not, in fact, rely on their entry-level jobs to fully support themselves or their families.
The most recent statistics by the Pew Research Center support this assertion. According to the 2014 research, 50.4 percent of all minimum-wage workers are ages 16 to 24, 64 percent work only part-time, and 55 percent are employed in the leisure and hospitality industry (including food preparation and other service-related jobs). The majority are white (77 percent), and well over half (62 percent) are women. In other words, the typical minimum wage worker is someone like me: a young adult who’s working part-time to make money supplemental to an existing (family) income.
The overall share of hourly paid workers earning minimum wage or less has also significantly decreased over the past few decades: in 1979, they represented 7.9 percent of all wage and salary workers, whereas today they represent only 2.6 percent of that demographic. With such a small percentage of the working population earning base pay or below, it’s unlikely that increasing the federal minimum wage by 50 percent or 100 percent would do much at all to improve the overall poverty rate.
Minimum Wage Hikes Hurt Those They’re Intended to Help
Basic economic logic lends credit to arguments against minimum wage hikes. If employers now have to pay their employees twice the amount they used to, they have two options: reduce the number of their employees, or raise the prices of their products—a move that drives down business and thus leads to job elimination anyway.
In Seattle, this is exactly what’s been happening. As research from the widely respected American Enterprise Institute explains, early evidence from the Bureau of Labor Statistics (BLS) suggests that “since last April when the first minimum wage hike took effect: a) the city’s employment has fallen by more than 11,000, b) the number of unemployed workers has risen by nearly 5,000, and c) the city’s jobless rate has increased by more than 1 percentage point.”
Thanks to the growing cost of labor, fast food prices are currently on the rise in Seattle, and restaurants here and in other cities are now considering getting rid of tipping altogether, proposing they instead increase their prices by 20 percent. While this might help restaurateurs pay their employees the new mandatory minimum, I can say from my own experience it would also likely dis-incentivize servers and diminish the quality of service.
Wage hikes not only force more people to compete for fewer positions, but they also pit people like me against older, more seasoned, and perhaps more qualified individuals who look a lot more attractive to Seattle employers.
I’m a young, educated, white male who comes from an upper-middle-class background. In other words, I’m exactly the type of person that society supposedly favors over all the rest. If it’s this difficult for me to land an entry-level, minimum-wage position, then what must it be like for more disadvantaged individuals, the very people compassionate liberals likely have in mind when they advocate for a spike in the minimum wage? Surely the poor inner-city teenager lacking education and job experience, or the struggling single mother who needs to work much more than just part-time to support her children, will lose out to other applicants even faster than I did.
The fact that cities like Seattle, and now states like California, can freely experiment with economic policy demonstrates the virtues of our nation’s federalist system. However, our local laboratories of democracy aren’t always foolproof. Sometimes, they get it wrong.
And I’ll bet my non-existent income that in time, the recent minimum wage hikes in cities and states throughout the country will provide further proof of this reality. Alas, in the meantime, my job search continues.
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