The real minimum wage? Try Zero

by Mitch Kokai, The Locker Room, January 30, 2015.

Avik Roy explains for Forbes readers why politicians’ push to raise the government-mandated minimum wage would end up making more low-skilled people eligible for the real minimum wage of zero.

Democrats haven’t been content with ObamaCare’s impact on part-time hourly workers. They’ve compounded the problem by leading a nationwide effort to increase the so-called minimum wage above the federally mandated $7.25 an hour. I say “so-called” because the real minimum wage is zero–the wage you get if you’re unemployed.

Obama failed to persuade Congress to raise the federal minimum wage, but last year activists were successful in passing minimum wage hikes in more than a dozen states. Ground zero in the minimum wage war is Seattle, where left-wing mayor Ed Murray signed a law jacking the minimum wage up to $15 an hour. “We have taken a great step forward in the challenge of addressing income inequality,” says Murray.

Howard Behar, the former president of Starbucks, expressed a different view at a conference organized by the Washington Policy Center. “You’re going to see more automation. … Don’t be surprised if Starbucks goes to all-cashless payment,” because then Starbucks wouldn’t have to employ cashiers. Even after Starbucks sheds workers, Behar calculates, the $15-an-hour wage mandate will make a $5.20 order cost $6.20. That dollar might not seem like much if you’re making six figures at Microsoft or Amazon. But higher retail prices raise dramatically the cost of living for those in the middle class.

Taylor Hoang is an entrepreneur behind Pho Cyclo Cafй, a chain of Vietnamese restaurants in the Seattle area. At the same conference where Behar spoke, Hoang said that the older, lower federal wage mandate “allows me to hire students, allows me to hire new immigrants to this country.” Now that wages will have to exceed $15 an hour, starting in April, Hoang won’t be able to hire new immigrants, because it’s too costly to train them. Instead, she plans to seek out “experienced workers” from other restaurants who already have the required skills.

There’s one reason above all that Democrats push wage mandates, and it has nothing to do with the interests of line cooks and cashiers. It’s about labor unions, many of which have negotiated collective bargaining agreements indexed to minimum wage hikes. Their goal is to increase labor costs throughout the economy. Thus far they’re succeeding. But the end result is fewer workers, higher prices and a more stagnant job market for those who most need the help.

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