$15 min­i­mum wage likely to hurt work­ers

The Register Citizen (Torrington, CT) - - OPINION - By An­drew Markowski An­drew Markowski is the state di­rec­tor for the Na­tional Fed­er­a­tion of In­de­pen­dent Busi­ness, which rep­re­sents sev­eral thou­sand small busi­nesses in Con­necti­cut.

Sup­port­ers of a bill to raise Con­necti­cut’s min­i­mum wage to $15 over three years say it’s an act of fair­ness. But if the work­ers those law­mak­ers in­tend to help are harmed in­stead when their hours are cut, their pay drops or they lose their job, how fair is it?

Re­cent re­search on the im­pact of min­i­mum wage bills around the coun­try that rise higher than the mar­ket can sus­tain, show there is a tip­ping point where peo­ple at the low end of the pay scale are hurt far more than they are helped.

Under Con­necti­cut’s last min­i­mum wage law, pay was bumped up by 45 cents the first two years, and 50 cents in 2017. Under the new pro­posal, the size of in­creases rises pre­cip­i­tously — $1.90 the first year, and $1.50 in each of the two fol­low­ing years, land­ing at $15 an hour. That’s al­most a 49-per­cent in­crease in pay in just three years. Small busi­nesses would be es­pe­cially hard hit.

It’s worth look­ing at a study last year con­tracted by the City of Seat­tle to mea­sure the im­pact of that city’s sec­ond in­cre­men­tal wage hike to $13 an hour, on the way to $15. Nine months af­ter that in­crease, about 5,000 low-wage jobs dis­ap­peared, the num­ber of hours worked by low-wage work­ers dropped by 3.5 mil­lion hours, and their wages dropped by $6 mil­lion.

This year, a study by Har­vard Busi­ness School looked at the con­nec­tion be­tween min­i­mum wage in­creases and restau­rant clo­sures. With a $1 min­i­mum wage hike, five-star restau­rants weren’t sig­nif­i­cantly im­pacted, but those with a 3.5-star rat­ing had a 14-per­cent higher clo­sure rate.

A De­cem­ber study of Cal­i­for­nia’s min­i­mum wage hikes over three decades found there was a mea­sur­able de­crease in em­ploy­ment among af­fected em­ploy­ees. Each 10-per­cent in­crease in min­i­mum wage led to a nearly 5-per­cent re­duc­tion in em­ploy­ment in in­dus­tries with a higher per­cent­age of min­i­mum wage em­ploy­ees.

Busi­nesses that hire many lower-wage work­ers are more likely to have ra­zor-thin profit mar­gins. Fac­ing higher la­bor costs, the owner could con­sider rais­ing the price of the prod­uct, but con­sumers may not be will­ing to pay more. The other op­tion is to re­duce em­ployee hours or lay off work­ers.

There are costs be­yond just pay­ing min­i­mum wage work­ers more. Em­ploy­ers must raise pay for those mak­ing a bit more than that amount, or morale and pro­duc­tiv­ity will suf­fer. Em­ploy­ers also face higher at­ten­dant costs such as in­creased pay­roll taxes, un­em­ploy­ment in­sur­ance and work­ers com­pen­sa­tion pre­mi­ums. Many small busi­nesses may sim­ply not be able to af­ford all the added costs.

The mar­ket­place is com­plex, and law­mak­ers sup­port­ing the “Fight for 15” may find their ef­forts deal a knock out blow to both em­ploy­ers and em­ploy­ees. They must con­sider the un­in­tended con­se­quences.

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