The further to the left or the right you move, the more your lens on life distorts.

Sunday, June 08, 2014

Unintended Consequences

The New York Times Editorial Board exemplifies the narrative of virtually all progressives in its effusive praise of the $15.00 minimum wage recently enacted in Seattle, Washington. Here's a snippet of their editorial:
The new $15-an-hour minimum wage approved this week in Seattle does more than guarantee a raise to tens of thousands of workers in the city. As the highest minimum in the nation, it changes the terms of the minimum-wage debate and expands the realm of the possible in setting new minimums.

In recent decades, proposals to lift the minimum — whether on the federal, state or local level — have been presented as a way to restore purchasing power lost to inflation during long stretches with no raises.

Seattle lawmakers have said, clearly and correctly, that catching up with inflation is not enough. To be adequate, a minimum wage also has to reflect real economic gains as measured by average wages and productivity growth. That could be accomplished by setting the federal minimum, currently $7.25 an hour, at $11 an hour to $18 an hour. But Republicans are opposed to even a paltry Democratic proposal to raise the federal minimum to $10.10 by 2016. Congressional inaction has caused Seattle and other cities and states to act on their own.

Ultimately, however, there is no substitute for a robust federal minimum wage, because broad prosperity requires a solid wage floor, not a patchwork. The question is whether bold action by states and municipalities will embolden Congress.
So ... in an economic climate where almost 90 million people are out of work, many dependent on government entitlements to survive, the NYT suggests that increasing the minimum wage, normally something applied only to entry level jobs and unskilled labor will ... what?
  • Increase the number of opportunities for those who are unemployed?
  • Result in businesses large and small increasing their labor force?
  • Grow the number of full time jobs and damp the increasing growth in part-time positions?
  • Remove barriers for a start-up business that needs to hire a few people but has little or no revenue at the beginning?
Here we encounter another progressive fantasy. The reality is that a substantial increase in the minimum wage will do none of those things. The majority of minimum wage earners are young and do not have the burdens of family finance. The majority of minimum wage earners progress to other jobs at higher pay rates. But none of that matters to the NYT or its progressive followers.

Here's what will happen as big government (in this case, I'll include the Seattle city council) pushes unrealistic minimum pay rates on businesses.

There will be a push toward more automation and fewer human entry level workers for service-oriented jobs. Many entry level jobs are not highly skilled. At the service level (e.g., Starbucks or McDonald's), I suspect that barrista's will slowly be replaced by "cyberistas," just as cashier's in many businesses have been replaced by automated checkout counters. Either that, or a cafe latte will cost $12.00!

There will be a push toward more automation and fewer human entry level workers for labor-oriented jobs. Many of these entry level jobs are not highly skilled. Advances in robotics are happening at astonishing speed. High minimum wages will spur the development of mobile "labor-bots" which can be more easily cost justified as labor expenses rise.  Bye, bye, entry-level laborers!

Worse, still -- the young people who would have filled those entry level service and labor jobs will now have no opportunity, no ability to learn a business and progress up the ladder, and no path toward a better life.

Progressives like to characterize opponents as uncaring or mean. In reality, by NOT considering the potential side effects of their recommendations, progressive true believers are more interested in moral preening that they are in considering the unintended consequences of high minimum wages on the very people they purport to help.