Glen’s Garden Market is an upscale grocery shop in Washington, paying above the minimum wage in DC. Then DC put the minimum wage up from $8.25 to $11.50 an hour, the rate Glen’s were already paying entry-level workers (the federal minimum wage is $7.25 per hour). So owner Danielle Vogel boosted hourly wages another dollar, to $12.50. With that action, Glen’s launched a real-time experiment on the impact of higher minimum wages on a small business as well as a test of how much consumers are willing to pay to guarantee a “living wage” for cashiers, baristas and others who wait on them.
D.C. Chamber of Commerce, not surprisingly, said that such a big jump in the minimum wage, with another hike to $15.00 an hour due by 2020, would hurt businesses and ultimately raise the cost of living in the city. Margaret Singleton, then-interim president of the D.C. Chamber, likened a minimum wage increase earlier this year to a tax passed on to customers. “The proposed legislation, as did the last minimum wage increase law, will increase the cost of housing, food and consumer products,” she testified before a D.C. Council committee. “Equally likely, employers would reduce fringe benefits and restructure their workforces or reduce future hiring because, after all, a minimum wage increase is a tax on employers that must be addressed in overhead and/or the product.”The chamber also argues the hike could mean residents of Virginia, where the minimum wage is $7.25, would apply for District jobs in greater numbers, hurting low-income D.C. employees.
The counter-argument is that businesses that put employees first see increased loyalty and productivity. Vogel said the wage increase would cost her about $200,000 this year, but added that higher wages would make for happier and more loyal employees. She said it’s too early to know whether a recent dip in sales is the result of higher prices or factors such as the election and holiday season. “We wouldn’t have done this if it were going to drive us out of business,” Vogel said. “It’s just going to make us have a hard couple of months as we adjust.” (Washington Post, December 2nd)
Some customers are going to be less willing to purchase some higher price items. But in this overwhelmingly Democrat city with a large population of young people, when it is explained that the higher prices are owing to a rise in wages of the worst-off employees, I think most people will pay up willingly. I don’t know this grocery store, but my wife and I intend to go over there and support of it.
Washington is a very expensive city. Even at $12.50 an hour it is difficult to see how people survive with health costs soaring. How can you afford a house, or children? How do you save anything? What do you do about a pension? When you can call a minimum wage a “tax” on employers it reveals a mindset that is rather shocking and un- Epicurean.
Cities like D.C, New York and San Francisco should go the full stretch and have a $15 minimum wage. Even $15 is hardly enough to live on, but it would be a welcome improvement. Just as importantly, America should abolish this insane loophole that allows workers who receive tips to be paid less.
The argument that minimum wages cost jobs and increase the cost of living hasn’t matched up with the evidence. When Britain first introduced a minimum wage in 1998, the Conservatives said exactly that. But it didn’t happen. Instead, employment went up, and the cost of living increased at roughly the same rate as before. I’m sure its true that were the minimum wage high enough, there would be negative side effects. But America is nowhere near that point, at least, not yet.
The only reasonable argument against the minimum wage comes from Nordic trade unions. The Nordic countries don’t have minimum wages. Instead, very powerful unions negotiate different wage floors in their respective industry; the minimum wage would be higher in financial services than in train driving. But this model requires strong unions, a healthy working relationship between the union and the employer, and high degrees of trust in society. America has none of those. Instead, employees treat employers as the enemy, and vice versa. American private sector union membership is in chronic decline, even as public sector union membership rises. So for America, higher minimum wages are necessary to prevent exploitation.
There are also other good arguments for a higher minimum wage despite the obvious benefits to the low paid. It would increase consumer spending, because the poor spend a higher proportion of their income (the marginal propensity to consume.) It would reduce government spending on in work benefits, because the need to ‘top up’ poverty wages would be negated. As you point out, productivity and workplace loyalty would increase. And now you may disagree with me that this is a good thing, but it would increase automation. Although this would result in a few jobs losses, automation makes the economy more productive, increasing employment and wealth overall.