How raising the minimum wage is killing people with kindness

It is high tide for egalitarian moral passion on the political left these days. After seven years of the “hope and change” president, the dream candidate of progressive government, his supporters are seeing a crisis of material inequality. From Occupy Wall Street to the groundswell of enthusiasm for Bernie Sanders, people of a more socialistic sentiment are demanding that we raise America’s economic floor.

The sentiment is understandable. It is disconcerting to see some people doing so well—hedge fund managers and Justin Bieber—while others see their purchasing power fall year after year. So California passed a minimum wage increase to $15 over the next six years. Take that, inequality! Won’t a Christian, or Christian-influenced, people show kindness to their neighbors by legally extending prosperity to some of the least among us?

But you can kill people with kindness that isn’t wisely directed. A legally mandated wage increase at the bottom of the wage scale will trigger demands for increases all the way up the chain. People previously making $15 and feeling good about it will be effectively reduced to minimum wage, so they will demand, say, $21. And so on up. With more money chasing the same goods, prices will increase accordingly, and then, in real terms, the minimum wage will be back where it was before: $15 will buy what $9 used to buy.

In pushing for a higher minimum wage in New York where the law requires $9 an hour, Gov. Andrew Cuomo said, “You cannot raise a family, pay for rent and food and insurance and healthcare on $18,000 a year in the city of New York.” But for that in metro New York you need at least $60,000, or $30 an hour plus benefits. A decent family income is not the point of the $9 wage, however. It is for entry-level work, low-skilled labor, and part-time employment. People who want a higher wage need to improve their skills or their marketability in some other way, not lobby the government to force more money out of employers.

I know a waitress who is very unhappy that New York raised the minimum wage for tipped workers from $5 an hour to $7.50. The premise of the lower wage is that these workers make the bulk of their income in tips. For restaurant owners, the wage hike is a 50 percent increase in labor costs, which are one-third of overall operating costs. So the immediate result for wait staff is layoffs or fewer hours and more tables to serve. This reduces the quality of service, resulting in lower tips. I have seen this happen. Higher prices from higher labor costs also disincline people to tip. As people become aware that table servers are paid more, they will feel less pressure to tip because the compensation is thought to be, as it were, baked into the cost of the meal. That waitress’ message to her friends in government is: Keep your helping hands to yourself!

As it is always with well-meaning misuses of government, the poor suffer while the rich feel good about themselves. Government is a clumsy, blunt instrument, useful mostly for punishing evildoers and repelling invaders. Charity is best left to the good judgment of neighbors. If there’s a problem with that, then average citizen character is something we need to work on anyway.