Kicking away the career ladder

Glenn Hamer

July 12, 2016

An initiative poised to appear on the November ballot that would raise the state minimum wage to $12 and impose new mandates on employers regarding paid leave policies is bad for Arizona. It will hurt job creators and job seekers.

That’s my take, anyway. A columnist with The Arizona Republic disagrees.

After supporters of a higher minimum wage filed petition signatures to send to voters the question of whether to raise the minimum wage by nearly 50 percent, I issued a statement pointing out why the proposal is such a rotten idea.

The Republic’s Ed Montini shot back with a column that read like it could’ve been written by Bernie Sanders. He called my views “baloney” and used the term “greedy SOB’s” to describe those of us who oppose the initiative. Subtle.

So with the admonishment not to pick a fight with someone who buys ink by the barrel in mind, it’s worth a look at why such a dramatic hike in the minimum wage and new mandates on employers are so destructive.

Higher labor costs, less hiring

For those individuals at the entry-level of the wage scale, passage of this proposition would be a major drag on the path to upward mobility.

You see, a higher minimum wage will do nothing to help those who are attempting to enter the labor market. Their hiring, after all, will become more expensive. Employers who could have expanded their workforce will instead be diverting resources to their now higher payroll costs.

According to an analysis completed earlier this year by the Employment Policies Institute, nearly half of employers surveyed in Washington, D.C., where the minimum hourly wage has hit $11.50 after a phased-in increase, have already reduced staffing levels or have cut the hours of current employees. Instead of the increased wealth and higher quality of life sought by progressive activists, the individuals they claim to represent will see smaller paychecks, or no paychecks at all.

Small business gets hit harder

Proponents are casting the debate over a higher minimum wage as a battle between haves and have-nots, a small cadre of Scrooges versus working stiffs.

But this proposition doesn’t discriminate. It’s not just the Fortune 500 that will be affected, but small businesses too. Small businesses have been responsible for 66 percent of net new jobs since the 1970s, but government mandates hit small employers disproportionately hard. From taxes to health care to higher labor costs, small business has little margin to absorb increased costs.

In Arizona, small business already must contend with a minimum wage higher than the federal wage, as well as annual escalators depending on the cost of living. A higher minimum wage makes things harder on entrepreneurs, not easier.

Higher prices

But don’t worry, say the proposition’s proponents. Employers can absorb the higher labor costs by raising prices and passing them on to consumers.

But how does making things more expensive help the poor?

As a small businessperson told the LA Times, “There’s only so much people are willing to spend on a cup of coffee or a sandwich.”

The robots are coming

The proposition would better be characterized as the Robot Employment Act. Higher minimum wages hasten automation, making employees unnecessary.

McDonald’s is rolling out something called the Create Your Taste kiosk. Panera is launching touch-screen ordering stations. Wendy’s franchises will feature automated ordering technology later this year as the company is “managing labor pressure,” according to the company’s president.

Just the natural progression of technology? Yes, that’s part of it. But companies are speeding these innovations to market in direct response to higher payroll costs.

Lest Mr. Montini believe otherwise, the head of a chamber of commerce was not the first stop on my career path. As a teenager, I flipped burgers at a Burger King and made a little over minimum wage. To this day I am grateful for that experience. It taught me about showing up on time, about customer service, about responsibility.

Americans in 2016 deserve the same opportunity to grab that first rung on the career ladder that I had back in the 1980s. Unfortunately, proponents of a dramatically higher minimum wage are making such opportunities harder to come by.  

 

Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry