Contributed to www.crediblyconnect.com by our good friend, Anthony Duke . . .
A friend of mine who owns a highfalutin martini bar in Manhattan called me in a tizzy the other day. Since her tavern also sells gourmet appetizers, one way or another the state's proposal to jack up the minimum wage from $8.75 to $15 over the next three years spells doom. Even if her flat-bread bakers aren't deemed fast-food workers, she will have to compete with McDonald's to keep them. Her claim: "It's not about profits. I can't afford it."
To be clear, there are few people I trust less than small-business owners when it comes to what they can and cannot afford to pay in wages and taxes. They can drive a fleet of G500s through their tax deductions and claim poor faster than they can buy a first-class ticket to fly off and play Torrey Pines. However, in this case I'll concede as I trust my martini-shaking friend and think that the Empire State's proposal is a super-sized order of unintended consequences.
First, a bit of background. The state decided to do this because they are tired of paying for food stamps and healthcare for millions of employed New Yorkers who work for wealthy corporations like McDonald's and 3G, the Brazilian billionaires who own Burger King. Food stamps, school lunch programs, healthcare. It's all on the public's dime because these jobs pay so poorly. It must really be dire in New York City because you can't really live there for less than $200,000, let along $8.75 an hour. But I digress.
In New York's attempt to play Robin Hood with the $4.8 billion McDonald's made last year, the state is also beating up independent restaurants. If their staff isn't covered by the law, they will have to compete for employees. True, I'd rather work in a nice restaurant than Wendy's, but a 70% raise in three years is real money. Scott Boras has to use his best chops to extort a 70% raise for his clients from the Yankees. Nice little local restaurants will close. Some of them anyway. Instead of an egg-white martini with duck bacon and spinach flatbread, it's a quarter pounder and a coke. Lovely.
Remember, this wage law won't cover retail workers, nannies and customer service workers or the guy who trims the hedges. They can eat cake, from a drive-thru, of course. So you can expect those people to migrate on over to the Golden Arches. That means retailers pay more or customer service gets even worse. Honestly, in many industries I can't imagine customer service getting any worse. I know, I know, No none gets a baby sitter for $9 an hour on the Upper West Side. But in Ithaca or, if other states follow, Peoria? You get the idea.
See, there isn't one New York. That $15 an hour is actually worth about $12 an hour in the Big Apple, according to the Pew Research Center. But up in places like Buffalo and Syracuse, it's worth as much as $17 in real buying power. Now you're making it harder for contractors, warehouses and other light manufacturers to keep employees.
Before I go any further, let me state that I think stagnant wages is one of our economy's biggest problems. And I do support a higher minimum wage. But this one is so poorly thought out that it reads like a Lewis Black standup routine.
I won't sound off on immigration, but in cities across America illegals are used to do everything from bussing tables and cutting grass to building houses. If ever there was an incentive to pay people illegal immigrants under the table, this is it.
Low-wage jobs have a purpose. It should be where people start. With the exception of New York City--which isn't really America, economically speaking--$15 an hour is just too high. It could actually create a disincentive for people to try to get out of the minimum-pay work and improve their lot. Why look for better work when $15 an hour lets you get by just fine in Watertown?
Here's a better solution. Let's give the minimum wage one last arbitrary bump. Make it $1or $2, ,or whatever a panel of reasonable economists can determine after being locked in a padded room with nothing but black coffee, a carton of Camels and each other for 48 hours. Then take that figure, strap it to the consumer price index and get on with it.