California currently leads the nation in implementing low-wage laws.
The state raised the minimum wage for fast food workers to $20 an hour.
“We’ve seen the inequities … we have a responsibility to do more,” Gov. Gavin Newsom said.
Labor unions have demanded higher minimum wages, and in states run by Democrats, they have typically gotten what they wanted.
CNN announced that “500,000 fast food workers in California will now earn $20 an hour.”
Gullible leftists at the Center for American Progress claim that raising the minimum wage would lift millions of families out of poverty and further stimulate the economy.
Yay! A happy cycle! A win-win.
But wait, if it’s beneficial for both parties, why just the minimum of $20, and not $30 or $100?
Because it is not in either party’s interest for the government to demand higher wages.
Messing with market prices always leads to unforeseen and nasty consequences.
Frédéric Bastiat, in his book The Visible and the Invisible, points out that when government power influences economic policy decisions, there are always visible and invisible consequences. “In most cases,” he writes, “the immediate results are favorable, but the final results are fatal.”
In this case, the direct impact is higher pay for existing employees. That’s great. That’s what’s visible. That’s what the media, the unions, and the Center for American Progress see. But the unseen impact is bigger, and worse.
1. Thousands of Californians are already out of work as restaurants close. Some have lost income as their employers cut hours. Restaurant chain El Pollo Loco cut employees’ hours by 10 percent.
Pizza Hut announced it was laying off more than 1,000 delivery drivers, with one of those drivers, Michael Ojeda, naturally questioning the move: “What’s the point of a pay raise if there’s no work?”
Second: Workers who still have jobs will lose them as employers become more willing to automate. Chipotle just developed a robot that makes burrito bowls. Even CNN said, “Some restaurants are [fast food workers] At the kiosk.”
3: Prices rise.
On the day Governor Newsom signed the bill, he was asked, “Can Californians expect prices to go up at McDonald’s or Starbucks?”
Newsom responded falsely, “I’ve heard that statement before. But it never happened!”
Nonsense. It actually happened. It happens whenever the government forces a wage increase. In this case, Starbucks’ prices went up by 15 percent. Customers will pay about $200 more per year for coffee. Chipotle’s chicken burritos will cost up to 8 percent more.
4: The worst invisible harm of minimum wage laws may be that they keep young, inexperienced people from even being hired, so they can’t gain valuable experience in their first jobs at fast food restaurants.
When Seattle politicians raised the minimum wage to $15 in 2014, I asked several teenagers what a minimum wage increase would mean to them.
“The minimum wage actually makes my chances of getting a job lower,” Rigel Noble Koza said. “If I’m more expensive, why would a company take the risk of hiring me? They’d hire a more experienced worker instead.”
Dillon Hodes spoke of a friend whose hours were reduced despite being fast at work because he was “young and inexperienced.”
Of course, these students were unusual. They were finalists in the classroom Stossel competition. They weren’t ignorant about economics; they knew how to look for the invisible.
If only politicians were that smart.
Government price fixing, like minimum wage laws, hurts the very people these laws are meant to help: young people and the poor.
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