Liberal Democrats are fond of claiming that they represent the interests of the “little guy” in society- the disadvantaged. Unfortunately, their pet proposal/initiative to raise the minimum wage on “big-box”retail strores like Wall Mart, Target, Costco, and Home Depot in Chicago means less entry level jobs, higher unemployment, and higher consumer prices- all of which harm the “working poor” the most- the very same constituencies liberal Dems claim to represent.
From today’s WSJ (subs req)
Last week the City Council voted 35-14 to impose a hyper-minimum wage on “big-box” retail stores with more than $1 billion of sales. The new law will require the likes of Wal-Mart, Target, Costco, and Home Depot to pay every worker — regardless of experience, education or skill — a minimum wage of $13 an hour by 2010 ($10 in salary and $3 in health benefits). At least another dozen cities, including Washington, D.C., are considering copy-cat laws.
Based on empirical economis evidence, such a proposal, if it goes into effect, would not be good for workers or consumers.
The only issue is how many jobs Chicago will lose. When the minimum wage rose to $8.50 an hour in 2004 in Santa Fe, New Mexico, the rate of job creation fell, and workers with 12 years of education or less “suffered an extremely large and negative effect,” according to a study by the Employment Policies Institute. Wal-Mart, Target and Lowe’s Home Improvement are already threatening to stop expanding in the city if the Chicago law is enforced. They say they can’t offer “every day low prices” and pay the city’s mandatory wage hikes at the same time.
The government mandated hyper-min-wage would mean that the biggest losers would be the very “poor” the “hyper-min-wage” is intended to help.
If the law does hold up, the biggest losers will be the poor who will pay higher prices. A study by the economics firm Global Insight calculates that the presence of Wal-Mart and other low-price retailers saves working families on average more than $2,000 a year. MIT professor Jerry Hausman has found that, although Wal-Mart does slightly reduce wage rates in nearby areas, its lower prices swamp that effect. The biggest beneficiaries are families with incomes of less than $10,000 for whom “a super center makes a 30 percent difference in what they can buy.”
If liberals who constantly talk about “economic justice” really wanted to achieve economic opportunity for the poor and middle class they claim to represent they would quit advocating governmnet wage and price controls- a relic of Communist command-control economies which have been an abysmal failure every time they have been instituted, and start supporting pro-growth across-the-board supply side tax cuts on income, dividends, capital gains, and inheritance instead of constantly opposing them.