ARC's 1st Law: As a "progressive" online discussion grows longer, the probability of a nefarious reference to Karl Rove approaches one

Sunday, February 11, 2007

The "Benefits" of a Higher Minimum Wage

fewer slack-jawed teens being employed.

That was the goal of the increase in the minimum wage, right? Because, as economists have predicted, that would be the impact. This story out of Arizona proves that There's No Such Thing As a Free Lunch.


I'll interrupt with some comments throughout the story... I apologize in advance.

New wage boost puts squeeze on teenage workers across Arizona
Employers are cutting back hours, laying off young staffers

Chad Graham
The Arizona Republic
Feb. 10, 2007 12:00 AM

Oh, for the days when Arizona's high school students could roll pizza dough, sweep up sticky floors in theaters or scoop ice cream without worrying about ballot initiatives affecting their earning power.

That's certainly not the case under the state's new minimum-wage law that went into effect last month.

Some Valley employers, especially those in the food industry, say payroll budgets have risen so much that they're cutting hours, instituting hiring freezes and laying off employees.

Wait a second... this wasn't supposed to happen! Nancy Pelosi said it wouldn't!
And teens are among the first workers to go.

Companies maintain the new wage was raised to $6.75 per hour from $5.15 per hour to help the breadwinners in working-poor families. Teens typically have other means of support.

Actually, companies aren't maintaining that the min wage increase was intended to help breadwinners of the working-poor - the politicians were the ones that made that assertion. I suppose that the preceding should be written as an explanation as to why companies are firing teens first - because companies certainly don't want to hurt bread-winners of the working poor. Interesting impact on the choice of retaining employees - I wonder what the impact is on hiring new employees, since presumably there is little difference between an unskilled teen and an unskilled "breadwinner."
Mark Messner, owner of Pepi's Pizza in south Phoenix, estimates he has employed more than 2,000 high school students since 1990. But he plans to lay off three teenage workers and decrease hours worked by others. Of his 25-person workforce, roughly 75 percent are in high school.

"I've had to go to some of my kids and say, 'Look, my payroll just increased 13 percent,' " he said. " 'Sorry, I don't have any hours for you.' "

Frankly, I think this is a great lesson to his mostly teenage workforce. No doubt they championed the increase...
For years, economists have debated how minimum-wage increases impact the teenage workforce.

The Employment Policies Institute in Washington, which opposed the recent increases, cited 2003 data by Federal Reserve economists showing a 10 percent increase caused a 2 percent to 3 percent decrease in employment.
Hmmm.... 3 employees let go out of 25 total for Pepi's Pizza, not including reduction in the number of hours. I would say that's more than a 3% decrease in employment.
It also cited comments by noted economist Milton Friedman, who maintained that high teen unemployment rates were largely the result of minimum-wage laws.

"After a wage hike, employers seek to take fewer chances on individuals with little education or experience," one institute researcher told lawmakers in 2004.

No... that sounds too rational. Surely employers don't give a damn what the cost of labor is at any given time. If the cost of labor increases, how can it be that they'd be more cautious as to what skills they're paying for?

And now for the most humorous part...
Tom Kelly, owner of Mary Coyle Ol' Fashion Ice Cream Parlor in Phoenix, voted for the minimum-wage increase. But he said, "The new law has impacted us quite a bit."

It added about $2,000 per month in expenses. The store, which employs mostly teen workers, has cut back on hours and has not replaced a couple of workers who quit.

Kelly raised the wages of workers who already made above minimum wage to ensure pay scales stayed even. As a result, "we have to be a lot more efficient" and must increase menu prices, he said.

Serves this dolt right... supporting an increase without understanding basic economics.

And when he talks about being more efficient, he's talking about higher skilled workers. He can't tolerate hiring an unskilled worker and hoping they learn on the job - they've got to deliver for the $6.75 that they're being paid.

Oh - and don't forget that the minimum wage increase is like a tax increase on all of us, since it results in increased prices. And also note that it's extremely regressive in nature - the wealthy can afford the increase in ice cream prices at Mary Coyle's Ol' Fashioned Ice Cream parlor - or in the price of milk, butter, eggs, etc, etc.
While most of the state's 124,067 workers between the ages of 16 and 19 made well above $5.15 per hour before the change, the new law has created real-life economic opportunities.

Liliana Hernandez brings home noticeably more under the new law. The 18-year-old, who attends Metro Tech High School in Phoenix and works part time at Central High School, is saving the extra money, maybe to put towards buying a used car.

Hernandez said she deserves the raise just like any other Arizona worker even if she still lives with her parents.

"I'm doing the best I can and working hard like everyone else," she said.

In the months leading up to last November's vote, advocates of the new law maintained that it would help Arizona create a "living wage" for some of the poorest workers.

The Economic Policy Institute estimated that 145,000 Arizonans would receive a pay raise. That was how many made $5.15 to $6.74 per hour.

There are 124k teens working in Arizona. 145k workers making something under the new minimum. So, the net effect of this law is to increase wages for 21,000 non-teens who make something below $6.75 per hour?
At one press conference, a mother described how she was unable to afford basic school supplies for her son.

Don't worry... you still won't be able to afford basic school supplies. Or ice cream at Mary Coyle's... Or pizza at Pepi's.

John Weischedel, a senior at the East Valley Institute of Technology in Mesa, knows he is lucky to be making $8 per hour at an auto dealership and learning technical skills. So are most of his friends who make $9 or more per hour while still attending high school.

After the minimum-wage law went into effect, "a couple of my friends got laid off - they worked in fast food," he said. "They're going to wait until they're out of high school to find other jobs."

That's right. Because the minimum wage is now high enough that employers cannot afford to hire people without experience.

I demand that we increase the minimum wage to $15/hr. It's the only solution. It's a crime that someone who is willing to work hard in this country can't make $30,000 a year.

Your Co-Conspirator,
ARC: St Wendeler

Comments (2)
Brian said...

I prefer the acronym TANSTAAFL, but I can see that the double negative will make some people cringe.

I didn't see, is the Arizona law indexed? So is the Kelly going to have to be 3% more efficient next year automatically as well?

Someone should have asked him if he would have supported a "maximum ice cream price" law instead? The equation still has to balance out.

St Wendeler said...

Maximum Ice Cream Price law... love it.

another alternative could be an increase in the price of sugar & dairy law...