As former McDonald's CEO Ed Rensi so eloquently explained not long ago, raising the minimum wage would wipe out thousands of entry level jobs for those who don't have very many other options.
Washington, DC is validation of Rensi's theory. According to a report from the Employment Policies Institute, nearly half of Washington, DC employers said they have either laid off employees or reduced the hours of employees to adapt to the District of Columbia's minimum wage hikes since 2014.
The District of Columbia has seen the minimum wage increase from $8.25 an hour in 2014 to a rate of $11.50 an hour today, and just yesterday an increase to $15 an hour was approved. The Institute surveyed 100 employers in Washington, DC to understand how they would react to further minimum wage hikes, only to find that in order to cut expenses, they have already started laying off employees and reducing hours in order to accommodate the most recent hikes, let alone deal with a further increase to $15 an hour. To offset the increase to $15, the survey found that another round of price increases, layoffs, and reduction in hours would have to take place - as well as potentially moving businesses out of the District. The survey also concluded, just as Rensi said would happen, employment opportunities for younger, less educated people was disappearing. Given the newly approved increase to $15 an hour, employment opportunities will disappear even faster for this group of workers - not that politicians care a lot about that of course, just as long as the union supports during election time.
From the Washington Free Beacon
“Employers affected by the proposed increase to a $15 minimum wage were asked if they had either reduced the number of employees on their staff, or reduced the hours of current employees, to adapt to recently enacted minimum wage increases,” the report says. “Nearly half of employers surveyed had already taken one of these steps—suggesting that 2014-16 minimum wage increases haven’t been absorbed through higher prices alone.”
According to the report, just over half of the businesses surveyed said they planned to raise prices in order to offset the cost of a minimum wage hike. Thirty-five percent said they would likely reduce staffing levels and 37 percent said they would reduce employees’ hours or reduce the number of hours they were open for business. Thirty-one percent of businesses said they were very likely to hire more skilled workers in the future to offset the higher wage.
One in five businesses said they would move out of the District of Columbia and into Arlington, Virginia where the minimum wage is $7.25 per hour. Sixteen percent of businesses surveyed said they were somewhat likely to close their business if the minimum wage hike were implemented and 6 percent of businesses said they would likely close.
“These results are consistent with the best and most recent published research on the minimum wage, which finds that past increases (at lower proposed wage levels) have reduced employment for younger and less-educated employees,” the report states.
“These proposed laws have encouraged a perception that D.C. is becoming less friendly for businesses,” the report says. “Two-thirds of surveyed businesses agreed with this sentiment, with half strongly agreeing that D.C. is becoming a business-unfriendly city.”
Rensi also made an observation that he suspects the push to raise the minimum wage to $15 an hour might not be that altruistic after all - perhaps it's to actually help depleted union coffers fill up with dues money. Given the fact that even officials who are signing on to minimum wage increases know that it doesn't make economic sense, it's difficult to argue with Rensi's assertion.