Best of Intentions

Progressives and denizens of the Left, from Bernie Sanders to the average customer at Whole Foods, are moved deeply by income inequality and fervently believe that a "living wage" is something that should be mandated by the federal government. After all, business owners are part of the hated one percent, and they could simply take less greedy profit out of their business to make it all happen.

From high on their moral perch, progressives argue that it's "unfair" for working people to be paid anything less than [fill in the blank] and "someone" just has to come up with the money—that someone being the business owner. Moral preening works fine in the abstract, but when "living wage" ideas are applied in the real world (a place antithetical to many progressives), problems arise.

Ian Tuttle reports on two small businesses in what may be the most progressive city in the United States—San Francisco. By a 77 - 23 percent margin, San Franciscans voted to institute a $15.00/hr minimum wage by 2018, with four incremental way points leading up to that date. Tuttle writes about one of those businesses:

Brian Hibbs, owner and operator of Comix Experience, an iconic comic-book and graphic-novel shop on San Francisco’s Divisadero Street ... opened Comix Experience on April Fools’ Day, 1989, when he was just 21 years old. Over two-and-a-half decades, the store has become a must-visit location for premier comic-book artists and graphic novelists, and Hibbs has become a leading figure in the industry, serving as a judge for the prestigious Will Eisner Comic Industry Awards and as a member of the Comic Book Legal Defense Fund’s board of directors. He notes with pride that his store has turned a profit each year — no small task — since its very first year. 

But that may not last. Hibbs says that the $15-an-hour minimum wage will require a staggering $80,000 in extra revenue annually. “I was appalled!” he says. “My jaw dropped. Eighty-thousand a year! I didn’t know that. I thought we were talking a small amount of money, something I could absorb.” He runs a tight operation already, he says. Comix Experience is open ten hours a day, seven days a week, with usually just one employee at each store at a time. It’s not viable to cut hours, he says, because his slowest hours are in the middle of the day. And he can’t raise prices, because comic books and graphic novels have their retail prices printed on the cover.  

What is a small-businessman to do?

The problem is that most people who champion "living wage" proposals haven't run a business and don't understand that any wage has additional costs tied to it—social security contributions by the business, unemployment compensation paid by the business, disability insurance payments made by the business, and other city, state, and federal taxes and fees tied to wages. As wages rise, so do all of those burdened costs. But considering those costs requires some math, and unfortunately, math and moral preening don't coexist very well.

Tuttle goes on to tell the story of Borderlands Books, a science fiction bookstore, that announced:

Although all of us at Borderlands support the concept of a living wage in princip[le] and we believe that it’s possible that the new law will be good for San Francisco — Borderlands Books as it exists is not a financially viable business if subject to that minimum wage.  Consequently we will be closing our doors no later than March 31st.

The New Yorker picked up the story, and a crowdsourced contributions to the store will keep it going until 2016.

But is that what we want, subsidized small businesses that must rely on the donations of strangers rather than quality business practices? I'm quite certain Elizabeth Warren and her Democratic supporters would say 'yes.' But what happens when two businesses become 20 and then 200. Will there be enough crowdsourced donations to support them all? Or will an unintended consequence of the progressives moral preening be that some small profitable businesses that would thrive otherwise will fail under a coercive wage structure?

The irony is that the big corporate entities (Walmart, Target, CVS, etc.) hated by the Left can afford the wage structure and only they will remain. So in effect, the "living wage' crowd is doing its best to kill small, privately owned businesses and replace them with the very thing they hate. And before they claim that at least employees at those big corporate entities will earn a "living wage," I suggest they read a few reports (e.g., here) on the future of automation and robotics over the next decade. By artificially mandating high wages for humans, the Left is making it much, much easier to justify the cost of automation and replace the workers with robots.

But no worries. After all, it's all being done with the very best of intentions.