Anti-Poverty Programs, Automation, David Macpherson, Disparate impact, Fringe Benefits, Living Wage, Marginal Productivity, Minimum Wage, Missouri Proposition B, The Show Me Institute, Unskilled Labor, William Evan
Proposition B sounds really good to many Missouri voters: all we have to do to help low-wage workers is declare that they must be paid a higher wage. That’s the pitch, of course. But voters should hear the cruel truth about the unintended consequences of this well-intentioned and ill-considered proposition on the ballot this week:
- Businesses are likely to increase prices to compensate for a higher mandated wage, which hurts all consumers, but especially the poor.
- Some low-skilled job losses or lost hours are assured, and they will hit the very least-skilled the hardest. No matter the legal minimum, the real minimum wage is always zero.
- Such job losses have long-term consequences: lost job experience that the least-skilled desperately need to get ahead.
- The harms will have a disparate impact on minorities.
- Large employers can substitute capital for low-skilled labor: automated kiosks to take orders and increasingly sophisticated robots to perform tasks. Again, the real minimum wage is always zero. As I’ve said before on this blog, automate no job before its time. But that’s what Prop B will encourage.
- Employers can make other compensatory changes. That includes reduced fringe benefits and break times, increased production quotas, and less desirable shifts for minimum wage workers.
- A large share of the presumed beneficiaries of a higher minimum wage are not impoverished. Many are teenagers or young adults living with their parents.
- All of the preceding points argue that an increase in the minimum wage is not an effective method of targeting poverty reduction. In fact, the harm it inflicts is targeted at the most needy.
- Small employers have less flexibility than large employers, and Prop B would place them at a competitive disadvantage. To that extent, a higher wage floor is most damaging to “mom & pop”, locally-owned businesses, and their employees. Again, the real minimum wage is always zero.
At least 24 earlier posts appear on this blog covering the topic of minimum wages. You can see most of them here. The points above are explored in more detail in those posts.
William Evan and David MacPherson of the Show-Me Institute have estimated the magnitude of the harms that are likely to result if Prop B is approved by voters on November 6, and they are significant. The voters of Missouri should not be seeking ways to make the state’s business environment less competitive.
Voters should keep in mind that wages in an unfettered market reflect the realities of labor demand and labor supply. Wages and other forms of compensation reflect the actual quantity, quality and productivity of available labor supplies. And for unskilled labor, which is often supplied by those who lack experience, a wage that matches their marginal productivity is one that provides that valuable experience. The last thing they need is for tasks requiring little skill to be performed by more experienced employees, or by machines. We cannot wish away these realities, and we cannot declare them suspended by law. Such efforts will have winners and losers, of course, though the former might not ever recognize the ephemeral nature of their gains. And as long as there is freedom of private decision-making, the consequences of such legal efforts will cause harm to those least able to withstand it.