The latest innovation in left-wing political economics is legislation that would raise the minimum wage in New York State to $15 an hour — but only for a select group of employers unlucky enough to be targeted by politicians.
The bill’s champion, New York State Senator Daniel Squadron, calls it the “Fair Wage Act.” But it would be more accurately called the “Unfair Wage Act,” because, rather than applying the $15 an hour rule to all employers or all employees, it picks and chooses some employers to saddle with the high wages.
Manufacturers are exempt. Non-profit organizations are exempt. Businesses with less than $50 million a year in gross revenue are exempt, though the law may cover them if they are subcontractors or franchises of the larger business. Mr. Squadron’s own interns (“Internships are unpaid…be able to work at least three days per week, has strong writing, communicating and organizational skills”) are, apparently, exempt, which might strike some as hypocritical.
All the exceptions allow Mr. Squadron, 34, a Democrat and Yale graduate who is a former aide to Senator Schumer, to convey the illusion that he’s being reasonable. Mr. Squadron’s press release announcing the bill spoke of requiring “those businesses that can most afford it to pay more.” A New York Times news article quoted him as explaining, “These aren’t those small businesses that are just barely getting by.”
New York state’s current minimum wage is $8 an hour. Mr. Squadron’s $15 an hour proposal would be a hefty increase over even that, and it would be more than double the current $7.25 an hour federal minimum.
Extracting money from successful businesses is a variation on the New York Democratic tax strategy, which targets successful individuals for higher income tax rates. Just as the high tax rates intended to redistribute wealth have had the effect of encouraging moves to Florida or other lower-tax states, a higher minimum wage is likely to have its own unintended and adverse consequences.
Some small franchise operations — Subway sandwich outlets, for example — may close, leaving their employees jobless. Rather than getting a raise to $15 an hour, those now former employees will find their compensation cut to the amount of their unemployment benefits.
Some “barely getting by” mom and pop businesses may have their employees quit to go work at McDonald’s or CVS, where entry-level jobs will all of a sudden pay $15 an hour because of Senator Squadron’s mandate. If the small businesses raise their own wages to compete, Mr. Squadron’s argument that his bill spares the little guys will be proven hollow. And if the small businesses don’t raise their wages, how are they supposed to compete for talent or hold on to their trained employees?
Some employees may have been planning to go to school to improve their skills and training so that they could really earn a higher wage rather than just being given one by government order. They may now decide to skip that extra studying. If one can double one’s pay and be paid a “living wage” without going to night school or completing that community college course, after all, why bother?
Other businesses might pass the wage increases along to customers in the form of higher prices, or to shareholders — including New York’s own vast public pension funds — in the former of lower dividends.
The economics of the whole legislative effort are so flawed — the idea that one can nearly double the minimum wage for some businesses without creating perverse incentives, affecting the rest of the labor market, and eliminating some jobs and businesses — that one begins to suspect that it isn’t about economics at all. The bill targets “formula retail stores” that, along with 11 or more other restaurants or stores, have “a standardized array of merchandise, a standardized façade, a standardized décor and color scheme, a uniform apparel, standardized signage, a trademark.”
If the certain politicians in New York want to outlaw the fast food restaurants, convenience stores, chain pharmacies, or big-box retailers that so many of their constituents choose each day to patronize, let them try. They’d almost certainly fail.
Instead, Senator Squadron and his allies are using selectively imposed wage mandates as a way of expressing their essentially cultural distaste for some businesses. It’s proof that the wage-hikers don’t believe their own story about higher wages helping businesses by reducing employee turnover. This is wage-regulation designed not so much as help for low-wage employees but as punishment for the owners of non-boutique retailers and non-gourmet restaurants: the wage front of the culture war.