In the Sunday, January 26, 2014 edition of the Seattle Times, we are treated to Pro and Con opinion pieces on a $15 minimum wage for Seattle. The Pro side saw the higher minimum as a means of closing the gap between low and high income earners; not an unexpected argument. (For one of the most cogent articles on income inequality see: David Brooks Column in the NY Times) It was on the Con side where a surprise occurred. The writer has a small business and makes the case that jumping Seattle’s minimum wage by over $5 an hour would add significantly to existing stresses on small business. One more increase on top of rising rents, utilities, employee benefits and completion from online merchants not to mention regulations (remember the City of Seattle imposed parking changes and mandated sick leave). The Con article noted that small businesses with less than 50 employees would be exempted, “But, if Fred Meyer, Home Depot and Starbucks are all paying $15 an hour, other businesses would be forced to follow suit if they want to compete for competent, capable employees.” Additionally, raising the minimum to $15 would force up wages for other workers. If all these costs cannot be offset by reducing labor or moving to a cheaper location, they would have to be passed on to customers. It would not be too long before these increased costs would flow into the general economy ($5 lattes anyone?) and the $15 minimum would be called too low. Off we’d go chasing our socialist tails once again.
Unfortunately, the Con plea veered hard left by proposing alternate ways of improving the lives of minimum wage earners by shifting taxes on small business to big corporations and wealthy people and implementing rent control. Every day there is another call for taxing the rich. As Margaret Thatcher said, “The problem with Socialism is eventually you run out of other people’s money.” As for rent control, do not some landlords qualify as owners of a small business? Also rent control has unintended consequences such as deferred maintenance, damping of new construction and landlords being forced to subsidize long time renters through below market rates.
Before we tinker with our economic system by mandating wage and rent levels not supported by the market, we should concentrate on policies that encourage investment, job creation and education that produces graduates with skills commensurate with higher pay. These are harder to do than voting for a $15 minimum wage and limiting rent but they do offer a greater possibility of a permanent solution.