George Gibbs Center for Economic Prosperity

Orlando Sen⁠t⁠⁠i⁠nel: Add⁠i⁠ng ⁠t⁠o employers’ cos⁠t⁠s w⁠i⁠ll speed up h⁠i⁠r⁠i⁠ng decl⁠i⁠ne

By: The James Madison Institute / March 1, 2013

The James Madison Institute

George Gibbs Center for Economic Prosperity

March 1, 2013

By Robert F. Sanchez | Guest columnist March 1, 2013
Nestled among the sure-fire applause lines in this year’s State of the Union speech was President Obama’s request to raise the federal minimum wage to $9 an hour from the current $7.25.In some states, including Florida, the minimum is already higher than the federal figure. But nationwide, the president’s proposal would impose a whopping 24 percent minimum-wage hike on many employers just as they are preparing to cope with the added costs of Obamacare.The president also wants to put the process on automatic pilot, adjusting wages annually to reflect changes in the cost of living — regardless of the state of the economy.In his speech, the president touted the wage boost as a way to help families escape poverty. “Tonight,” he said, “let’s declare that, in the wealthiest nation on Earth, no one who works fulltime should have to live in poverty — and raise the federal minimum wage to $9 an hour.”Yet as Michael Saltsman of the Employment Policies Institute succinctly noted in the Wall Street Journal: “Sixty percent of the people living below the poverty line didn’t work last year. They don’t need a raise; they need a job.”Multiple studies have shown that only one out of six minimum-wage workers is the sole support of a family. Many are teenagers or young adults still living at home, and many are trainees who will get a raise once they learn the job.As for those who need a job, whether they’ll get one may depend on how Congress answers some basic questions: Will piling more burdens on employers create jobs? Or will higher labor costs accelerate a trend that’s obvious to every shopper at stores where the customers now perform the role formerly handled by cashiers? Or where fast-food customers serve themselves instead of waiting for a worker to hand them sodas?These trends, abetted by technology, are no accident. They’re just readily visible signs of employers’ responses to the rising cost of labor. It’s a cost that goes well beyond the worker’s hourly wage. It also includes the employer’s share of Social Security and, in many jobs, the cost of workers’ compensation, unemployment insurance, paid sick leave and, soon, the burgeoning cost of health insurance under Obamacare.If this wage hike is mandated, expect more symptoms of retrenchment in hiring. Ever get the munchies at an odd hour? You may soon be out of luck. Although many fast-food restaurants expanded their hours in recent years, the better to recoup their fixed costs, they’ll soon need to recalculate.Those restaurants must ask themselves whether the extra sales they gain by staying open longer will offset the ever-higher cost of labor. For some the answer will be “yes”; for others, “no.” But the public can expect a paring of those marginal hours when only a few diehards wander inside or swerve into the drive-through lane well after midnight. Net effect: fewer jobs — or fewer hours on the clock for those still employed.Obama’s proposal — and the applause from his party’s side of the aisle — recalls one of the most candid remarks a politician ever made about his own party. It was uttered at a business forum during the presidential primary campaign of 1992, when jobs were a big issue in the race eventually won by Bill Clinton with an assist from Ross Perot.Candidate Paul Tsongas, a pro-business U.S. senator from Massachusetts, sarcastically summed up his fellow Democrats’ economic philosophy: “We Democrats love jobs. It’s employers we can’t stand.”Judging by President Obama’s rhetoric, nothing much has changed.Robert F. Sanchez is the policy director at The James Madison Institute, a nonpartisan Tallahassee-based think tank founded in 1987.