Never underestimate the American worker. If you had to guess, who would you say is better at understanding basic economics– a $70K a year politician or a restaurant worker in Maine who makes $3.75 an hour? You know, of course, the restaurant worker leaves the politician in the dust – thus we have a prime example of the “A” students in Econ 101 teaching the political hacks a lesson or two. This latest teachable moment has occurred in the Pine Tree State.
Maine servers and waiters expressed relief after the Maine House voted 110-37 overturning a referendum that would raise their hourly pay from $3.75 in 2016 to $12 by 2024. Fearing that their take-home pay would decrease and small businesses would shut down, restaurant workers defied conventional leftist wisdom by fighting against a higher minimum wage.
In November 2016, 55% of Maine voters supported a referendum that would increase the minimum wage all the way to $12 for tipped restaurant workers by 2024. The legislation was signed into law by Governor Paul LePage (R-ME) on June 22, despite opposing a higher tipped minimum wage.
Undeterred by the referendum, servers had aggressively campaigned to overturn the results, worried that their livelihood would be negatively impacted. They continuously outlined their concerns, arguing that restaurants would have to raise prices, cut shifts and perhaps even close their doors.
Suffice to say, these restaurant servers understood fundamental economics, including Sue Vallenza, a 55-year-old bartender at the Pilot House in Kennebunk, Maine. Speaking at the Maine Legislature’s Labor, Commerce, Research and Economic Development Committee, Vallenza was one of dozens of servers to explain that their tips were already decreasing:
I don’t need to be “saved,” and I’ll be damned if small groups of uninformed people are voting on my livelihood. You can’t cut someone off at the knees like that.
With a victory in Maine, the next battle will be waged at the national level, says Jason Buckwalter, a server who helped organize the initiative against a higher minimum wage. He confirmed that he is now working with industry employees in Minneapolis and Seattle:
The next fight is on the national level. I had lost my faith in government. This restored it, a little.
Not everyone is happy. According to The Washington Post, the servers’ campaign is already rankling labor activists, many of whom feel their Fight for $15 efforts may be undermined in the District of Columbia, Massachusetts and New York. The newspaper spoke with several experts, highlighting that these servers’ fears are unwarranted.
Whether their anxieties are founded or not, the U.S. is already beginning to gather the data in certain jurisdictions that have a higher minimum wage and are on their way towards a $15 wage rate.
This month, the National Bureau of Economic Research (NBER) published a paper entitled “Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle.” The report, looking at the effects of Seattle’s $13 minimum wage, discovered that the city’s low-wage workers saw their total payroll fall by an average of $125 per month, or $1,500 a year. Although their hourly wages increased by 3%, low-wage workers saw their hours slashed by about 10%.
Restaurants reacted to higher labor costs by cutting hours for staff – the main worry of Maine servers.
Initially, when the gradual wage hike was implemented, job losses in the restaurant sector climbed. The increase in Seattle’s jobless rate between April and December 2015 was the biggest over any other nine-month time frame since the Great Recession. Since then, however, the reduction of restaurant jobs has cooled down, but that can be attributed to Seattle’s vibrant economy.
But what happens when the economy dips? That’s what Ben Shapiro of The Daily Wire is wondering:
Here are the facts: Seattle barely had any jobs under the $11 threshold before the legislation passed. But that wasn’t true of $13 jobs. And the regulations essentially priced a good deal of full-time low-wage labor out of the market. Furthermore, the economy in Seattle right now is strong. What happens during a downturn, when businesses have to shed costs?
But one West Coast city isn’t having the same amount of luck as Seattle: San Diego.
San Diego, one of the liveliest economies in the U.S. today, instituted a minimum wage of $11.50 in January 2016, a jump from $10. Fifteen months later, an estimated 4,000 jobs have been lost or were never created in the first place, according to research from Lynn Reaser, chief economist of the Fermanian Business & Economic Institute at Point Loma Nazarene University:
If job growth in the restaurant sector had just kept pace with the state’s performance … the industry could have created 5,200 jobs instead of the 1,300 that took place.
The American Enterprise Institute (AEI) highlighted this growing development in a recent chart, which shows a declining trend from July 2016 to May 2017.
It should be of grave concern to many when even Governor Jerry Brown (D-CA) conceded a higher minimum wage didn’t make sense:
So, economically, minimum wages may not make sense. But morally and socially and politically, they make every sense, because it binds the community together and makes sure parents can take care of their kids in a much more satisfactory way.
Overall, annual growth in U.S. restaurant employment tumbled to a six-year low in March. As more businesses brace for a $15 minimum wage, they are less likely to boost their personnel numbers.
US Restaurant Job Growth Fell to a 6-Year Low in March. Are Minimum Wage Hikes (and Threats) Causing a Restaurant Recession? pic.twitter.com/nZfAGZl4jO
— Mark J. Perry (@Mark_J_Perry) April 7, 2017
Also, these same restaurants are adapting to the current situation by amplifying their automation efforts.
Across the U.S., a wide array of restaurants – McDonald’s, Wendy’s, Pizza Hut and others – have installed technologies like self-serve kiosks. Essentially, the Fight for $15 crowd is aiding companies in replacing these low-wage workers with robots.
What many proponents of a higher minimum wage fail to realize is that restaurants of all sizes face minuscule profit margins. Any additional labor costs will greatly affect these businesses, even if a $15 minimum wage is phased in over a five-year period. A franchise like Subway or Burger King may be able to absorb the cost, but the average mom & pop shop can’t. With that in mind, the left is really helping billion-dollar corporations, entities that they loathe, in trimming workforce numbers.
Gov. Brown was right: a minimum wage defies economic logic; it’s compulsory unemployment.
Those who adhere to economic and social justice may believe they’re sticking it to the rich, but they’re really hurting the very people they claim to care about: the impecunious, immigrants and youth, groups who will be the first to lose their jobs when mandated wage hikes take effect.
And so, the question must be asked: Why does the left hate the poor so much?
Andrew has written extensively on economics, business, and political subjects for the last decade. He also writes about economics at Economic Collapse News and commodities at EarnForex.com. He is the author of "The War on Cash." You can learn more at AndrewMoran.net.
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