In October, Tastes of Life, a locally-owned restaurant ministry announced it will close because the increased costs it will incur from raising wages surpasses its revenue. The business employed 12 people struggling with terminal illnesses, family problems, or criminal records. These employees, whom Tastes of Life provided counseling, job experience, and a small income, all lost their jobs due to a policy supposedly intended to help those just like them.
Since Gov. Rick Snyder approved an increase in Michigan’s minimum wage to $8.15 on Labor Day, local businesses have shut down, cut workers’ hours, and raised prices. As a result, the people whom this policy intends to help most, low-wage workers, are often the ones most hurt by it.
“Minimum wage is horrendously misguided,” said Sid Halley, owner of local sandwich shop Oakley, which closed last month partially because he couldn’t afford to increase his workers’ pay to the new minimum wage.
To avoid a similar fate, many of Hillsdale’s other small businesses choose either to cut workers’ hours or raise prices to make up for the added cost of the increased wages. Among these include: Coffee Cup Diner, David’s Dolce Vita, Finish Line Family Restaurant, Here’s To You Pub & Grub, and House of Pizza and Barbecue.
Lisa Slade, owner of the Finish Line, predicts many others will follow suit to keep up with the tiered increases built into the legislation resulting in a state minimum wage of $9.25 by 2018. Because increased costs of running business are passed on to either the workers or consumers, Slade said she doesn’t understand the point of raising the wage.
“To me, it seems it’s all going to wash,” Slade said. “Not just my prices will go up. Most businesses are going to raise their prices. How did that help?”
Most of the businesses not cutting hours or raising prices yet are those that already pay their workers above the minimum wage. Yet, they are still limited by the legislation because they can’t start beginning workers at a lower pay and reward them by increasing their salary. Instead, they must pay them the higher wage from the get-go, often providing incentives against hiring unskilled workers.
“It irritates me because the government dictates what to pay,” Slade said. “I like to give people raises when they do a good job. The guy who is doing a good job shouldn’t make the same amount as the guy who is still learning.”
Halley added, “There is no incentive for betterment…minimum wage is a very poor idea.”
Yet these unintended consequences shouldn’t surprise anyone, because they haven’t changed since the first minimum wage laws were enacted in 1912 in Massachusetts.
Most early minimum wage laws organized governing boards to determine a cost of living to which women’s wages would be set equal, according to Clifford F. Thies’s “The First Minimum Wage Laws.” Despite the supporters’ intentions of uplifting the disadvantaged (mostly women at the time), their efforts were largely unsuccessful since 12 of the original 17 minimum wage laws were repealed, deemed unconstitutional, or weren’t enforced.
Furthermore, the requirement of a minimum wage forced employers to hire less workers overall. The “slow” or less efficient workers lost or couldn’t find jobs and many began looking to the government for aid.
As seen in Hillsdale, even those low-wage workers who did keep their jobs often worked fewer hours or didn’t receive raises. Although the minimum wage originally was meant to help women find jobs, it led to a higher percentage of women than men losing their jobs when employers had to make cuts.
In 1964, about 50 years after the minimum wage’s introduction, New York State State Department of Labor mail survey of retail stores details these consequences. Conducted after the enactment of a 1957 wage law, the survey found 87 percent of 7,757 employers had to offset the wage increase through lay offs, decreased hours, and fewer benefits.
Fifty years later and this hasn’t changed. Minimum wage still hurts those who most need jobs and who its supporters claim it helps the most.
