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Latest News - August 2013

August 20, 2013
If A $15 An Hour Minimum Wage Is Good, Why Not Make It $200?
Source: Investor's Business Daily

Labor: Fast-food workers are planning a one-day strike on Aug. 29 to demand an increase in wages from the $7.25 minimum to $15 an hour. But if $15 an hour is so great, why not ask for $100 or $200 an hour instead?

The question is, of course, absurd. Any elementary-school child — at least, one not educated in a U.S. public school — could answer correctly: That at $100 an hour, or $200 an hour, no one would be hired to do a job that the market valued at far less. And many would be fired.

Take the fast-food industry. Prices for food would be so high that consumers would stop eating at McDonald's, Wendy's or other cheap fast-food outlets. It would be a treat only the rich could afford, at a few select outlets in Beverly Hills and other swanky locales. Fast-food workers would be laid off by the thousands.

OK, but $15 an hour isn't $100 an hour. True enough. But the principle is the same. By our calculation, that's a 107% increase over the current minimum wage of $7.25 and a 78% rise over McDonald's average wage rate of $8.43 an hour. Either way, that's a huge increase.

Those on the left who pretend to be the friends of working people say these huge wage hikes could come out of rich storeowners' pockets. Or corporate profits.

But this betrays a profound ignorance of how the economy really works. Mandated wage hikes act as a tax on employers — who then either pass them on to consumers in the form of higher prices, or on to workers in the form of layoffs or hiring freezes.

In short, despite the left's rhetoric to the contrary, McDonald's won't suffer, Wendy's won't suffer — low-wage workers will. There will be far fewer jobs. And consumers will suffer a lower standard of living by having to pay more for their fast-food meals.

That is what's called "lose-lose" in game theory.

The average fast-food restaurant spends somewhere between 25% and 35% of its revenues on wages. So doubling the wage expenses of a McDonald's, for example, would require the price of the average Big Mac to rise 32%, from $3.99 to $5.27, according to the Employment Policies Institute, a business think tank.

For many financially struggling families, such price increases would mean the weekly trip to McDonald's would no longer be affordable.

So why the sudden push to raise wages by so much?

A lot of this comes from the Service Employees International Union and others that want to "organize" fast-food workers. It's also pushed by hypocritical far-left politicians — most prominently Sen. Elizabeth Warren of Massachusetts, who advocates a $22-an-hour minimum wage but pays her own interns nothing.

If they value their jobs and their incomes, fast-food workers would be wise not to strike. These low-paid workers are mostly young and often minority. They already suffer an unemployment rate above 20%, in large part due to three minimum-wage hikes since 2007. Pushing wages up further will only make it worse.

Sure, forcing minimum-wage hikes on small businesses may sound good, but in fact it hurts young, uneducated and unskilled workers by depriving them of opportunies — while lowering living standards for the rest of us.

How is any of that good?



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