Raising minimum wage may bring unintended results

STEUBENVILLE – While many low-wage workers and social activists are hailing last week’s approval of a $15-an-hour minimum wage by the city council of Seattle as something that should bring fairness and equality, the economic realities of the minimum wage are far different.

Joseph Zoric, professor of economics at the Franciscan University of Steubenville and a member of the board of academic advisers to the Buckeye Policy Institute, said the minimum wage ends up creating discrimination.

“Essentially the minimum wage tells the employer that they must discriminate against any low-skilled worker or worker with very little experience, because that worker isn’t worth the minimum wage,” Zoric said. “The employer can’t hire that person. Employers aren’t stupid. They will hire somebody who is worth the wage you have to pay them. They will make sure they hire someone who is worth $15 an hour.”

Instead of fueling higher prices, Zoric said, a higher minimum wage ends up reducing the number of jobs available for “the people that we most like to help in the economy. The very ones who are aimed at being helped by the minimum wage are the ones who end up being hurt.”

And, despite depictions in news accounts and by politicians, the average minimum wage earner is not a poor person. It’s actually a middle-class person or a college kid, the second or third wage earner in the family.

“Overall, fewer than 3 percent of workers make the minimum wage in the United States. Half of them are teenagers. And, there already was a very high unemployment rate among teens in February. It was 20 percent for all teens and 36 percent for African-American teens,” he said.

Seattle is incrementally increasing its minimum wage to $15 over a period of years. Supporters in the Seattle area as well as a number of researchers have said previous minimum wage increases were absorbed by small price increases and greater worker productivity.

Zoric said those who are employed but who find their current salary is below the minimum wage might see a raise. but they will also see their total package value decrease.

“The employer will look for ways to cut the cost of having you in their employment. They will take away your vacation. If they pay for your parking, they will take that way. If I own a restaurant and I’m feeding you, I won’t feed you anymore. The person who keeps their job will find their benefits are reduced,” Zoric said.

“Basically, you are making the higher wage and you’re worse off. There might not be a 401(k) or health insurance,” he said. And, while the government is making health care more readily available, workers still have to pay for it, he said.

It might be easy to think prices will rise to cover the higher wages, but Zoric said in a competitive economy, that isn’t necessarily the case. McDonald’s, for example, loses a competitive position if it raises the price of its sandwiches but other fast food competitors don’t.

“If you’re in a competitive market, you may not be able to raise your prices, so you have to look for ways to cut your costs,” he said.

In a blog for the Franciscan University of Steubenville’s website earlier this year, Zoric had written about research he had done on the impact of minimum wage increases and he found, as an example, that Bob Evans Restaurants did away with bus boys, putting that work on the servers.

“Other fast-food companies are experimenting with having you input your order on an iPad instead of having someone working at the counter to ask what you want. It cuts out more labor costs,” he said.

(Giannamore may be reached at pgiannamore@heraldstaronline.com)