“Who’s Afraid of a Higher Minimum Wage?” asked the December 4 Washington Post Business section headline. Certainly no business owners in the Washington, D.C., area, claimed the paper.
The story by Michael Rosenwald posited that many small business owners in metropolitan Washington have nothing to lose with the proposed federal minimum wage hike because many businesses in the area already pay well above the minimum wage, with some even paying above what the Democrats envision as the new wage floor.
In the case of the nation’s capital region, that’s mostly accurate, agreed conservative Heritage Foundation senior fellow James Sherk. But, he added, that’s hardly the full story since the policy would hurt those it is supposed to help: the nation’s lowest-paid unskilled workers.
Rosenwald mostly avoided the political debate, aside from quoting a statistic from a left-leaning policy group. The number of residents in the Washington area earning “at least $5.15 an hour but less than the Democrat-proposed $7.25 will be 5.6 million by 2009,” according to “The Economic Policy Institute [EPI], a Washington think tank.”
No such consideration was given to Sherk’s think tank or any number of other conservative groups that oppose a minimum wage hike, although Rosenwald noted that the National Restaurant Association “recently released a poll in which 41 percent of family dining and casual restaurant operators said they would cut jobs” after a minimum wage increase.
In a telephone interview with the Business & Media Institute, Sherk argued that minimum wage hikes disproportionately benefit skilled workers, particularly those who are members of a union, over non-unionized unskilled laborers.
Higher labor costs give businesses an incentive to reconfigure their work arrangements to invest in more equipment and fewer laborers, Sherk argued. In doing so, the labor force shifts to favor those who are slightly skilled as opposed to entry-level unskilled workers.
While it “takes about a year” for the shift from human labor to more equipment and fewer, higher-skilled workers to happen, that’s about the same time it takes for a new employee to start moving out of minimum wage territory.
“Two-thirds of all minimum wage earners earn a raise within a year of getting started,” Sherk, who holds a master’s degree in economics from the University of Rochester, told BMI.
The bottom line, Sherk argued in a July 28 WebMemo, is that “Increased productivity, not government fiat,” is the unskilled worker’s best hope for higher wages.
