Fast-Food Workers Strike, Arrested Across America: The Unseen Costs Of The Minimum Wage

"Get up! Get down! Fast-food workers run this town!" were the chants from fast-food workers in over 100 cities across America today, as empowered by President Obama's explanation of 'fairness', they demanded a $15-per-hour minimum wage amid strikes, rallies, and acts of civil disobedience.

"They want $15 an hour and McDonalds Corporation should give it to them immediately" - Protest Organizerr Rev. Charles Williams II

Many fast-food chains and independent restaurants have said that a $15 hourly wage would lead to big price increases on their menus or make it impossible to eke out a profit, adding that they "believe that any minimum wage increase should be implemented over time so that the impact on owners of small and medium-sized businesses." Police arrested 19 workers in NYC and several dozen were placed in handcuffs in Detroit and organizers strongly denied unconfirmed fast-food industry accusations that some workers were being paid $250 to $500 by the union to strike. While the economic reasoning for a minimum-wage hike has been dead-and-buried, we try one more time to explain the hidden costs of the minimum wage.

 

 

As The LA Times reports,

Fanny Velazquez, 36, said she was participating in the rally to fight for better wages to support her family. A single mother with three children, ages 11, 14 and 16, she said she struggles to make her $9.34-an-hour pay cover all the bills.

 

The South Los Angeles resident has been working at McDonald's for eight years doing a variety of jobs, usually working 20 hours a week. But lately, Velazquez said, the company has often cut her hours to 15 a week. She also qualifies for welfare and food assistance.

 

"It's difficult, it's not enough to pay my bills," she said.

 

A series of protests funded in part by the Service Employees International Union and local activist groups have sought to spotlight the plight of low-wage workers and push for higher pay.

And USA Today continues...

Strikers began to gather in more than 100 cities early Thursday, affecting major chains from McDonald's to Wendy's to Burger King. Shortly after 7 a.m. ET on Thursday, police arrested 19 workers who sat down in the street — and refused to move — outside the bustling McDonald's at New York's Times Square, reports the New York City Police Department. Up to several dozen striking fast-food workers were placed in handcuffs and arrested in Detroit, as well.

 

...

 

"There has to be civil disobedience because workers don't see any other way to get $15 an hour and a union," says Kendall Fells, organizing director of the organizing group Fast Food Forward, which is financially backed by the Service Employees International Union. "There's a long history of this, from the civil rights movement to the farm workers movement."

 

...

 

Organizers strongly denied unconfirmed fast-food industry accusations that some workers were being paid $250 to $500 by the union to strike. " Workers are not getting paid to strike," says Fells. "It's an age-old tradition in the union movement that workers who are losing pay by going on strike get support from other workers through strike funds. Other workers are supporting strikers through a strike fund, as they have since this movement started."

 

...

 

The strike comes just days after President Obama appeared to lend support to the so-called Fight for $15 movement at a Labor Day speech in Milwaukee. "All across the country right now, there's a national movement going on made up of fast-food workers organizing to life wages so they can provide for their families with pride and dignity," Obama said.

In a statement, McDonald's said

"We believe that any minimum wage increase should be implemented over time so that the impact on owners and small and medium-sized businesses — like the ones who own and operate the majority of our restaurants — is manageable."

*  *  *

And we leave it to Josh Grossman of The Ludwig von Mises Institute blog to explain, The Unseen costs of the minimum wage...

A recent article at US News and World Report by Pat Garofalo quotes Associated Press writer Christopher Rugaber who says that “US states that boosted their minimums at the beginning of the year, the number of jobs grew an average of 0.85 percent from January through June. The average for the other 37 states was 0.61 percent.” However, this appears to be another example of the Broken Window fallacy refuted by Frédéric Bastiat in his famous essay “That Which is Seen and Unseen.” In the introduction Bastiat states that

 

"in the economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause — it is seen. The others unfold in succession — they are not seen: it is well for us if they are foreseen. Between a good and a bad economist this constitutes the whole difference — the one takes account of the visible effect; the other takes account both of the effects which are seen and also of those which it is necessary to foresee."

 

By raising wage rates, the public can see their states’ minimum-wage earners making more money. This is the factor that is seen. What is unseen is the number of jobs destroyed or citizens who would have been able to obtain jobs if the minimum wage were never raised in these states in the first place.

 

But even the government statistics do not add nearly as much support as the pro-minimum wage group implies. Florida, for example, was one of the thirteen states that raised its minimum wage to $7.93 per hour as of January 1, 2014. Looking at monthly seasonally-adjusted employment and unemployment data for Florida, comparing January to May 2014, we find that the unemployment rate actually increased from 6.1 percent to 6.3 percent, respectively. The unemployment rate of Florida might be several times larger but for the fact that only those still actively seeking work are considered to be employed, and do not include those who are underemployed or have given up looking for work. In addition, this data clearly demonstrates that the Florida unemployment rate was decreasing every month prior to the minimum wage being raised from 7.4 percent in July 2013 to 5.9 percent in December 2013 before increasing to 6.3 percent upon introduction of the new minimum wage in January. It’s dangerous to draw broad conclusions from a single statistic like this, but it’s clear that we can hardly conclude, as Garofalo has done, that minimum wage hikes “have little to no effect on employment.”

 

Another weakness behind the claims that minimum wages raise the well-being of workers, is that it does not state what kinds of jobs are being created. An increase in government jobs, for example, does not create added wealth to a state’s economy. In fact, such jobs are a drag because they have to be paid for by imposing higher taxes on the productive sector of the economy.

 

Even more uncertainty is added if we consider Cantillon effects, which tell us that in response to money-supply inflation, prices (including labor prices) do not change uniformly and at the same speed, so the effect of raising the minimum wage will be different in each of these thirteen states.

 

Finally, if raising minimum wages does increase the number of jobs in these states, why don’t their governors and legislatures raise the minimum wage to $100 to $1,000 dollars per hour? To ask the question is to answer it as even these interventionist politicians know that no one besides government bureaucrats would still be employed under such as system. Any first-year economics student knows that, all things being equal, as the price of an item increases, demand for that item decreases accordingly. Wage rates are labor’s price. As wage rates increase, employers demand for workers will decrease. By increasing the minimum wage, politicians in these thirteen states are condemning many of their citizens to unemployment.

 

Murray Rothbard perhaps said it best when he argued that the minimum wage “is compulsory unemployment, period … the minimum wage law provides no jobs; it only outlaws them; and outlawed jobs are the inevitable result.”

*  *  *

Enough?

Comments

No comments yet! Be the first to add yours.