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BERMAN: Raising the minimum wage is but a bad magic trick
Presto, change-o and workers will be hurt
Question of the Day
Apparently America's employees were better off in 1968 than they are today. At least, such is the claim of the labor-backed activists and the AFL-CIO's chief economist. By their telling, the minimum wage has lost value -- if it were fairly adjusted since the late 1960s, it would today be set at $10.58.
Yet arguments about inflation and the minimum wage cut both ways. For instance, if the minimum wage had been indexed to inflation based on 1938 levels -- the year it was created -- its current rate would be $4.08.
That number isn't quite as helpful for the activists' cause. Yet that's exactly the point: For them, this issue is more about the story than the facts -- hence the choice of a cherry-picked 1968 reference point.
You won't hear the AFL-CIO offer this crucial caveat, though. That's because their narrative is much like a Penn and Teller routine, where the trick is to get you to "look here, not there" as the misdirection gets you to believe in a new reality.
Unfortunately, this story won't have a happy or funny ending for minimum-wage earners.
Minimum wage increases rapidly accelerate the rate at which technological innovations replace entry-level jobs. Employers are constantly trying to manage with higher labor costs while keeping prices in check. When possible, they turn to automated processes as a necessary way to replace ever more expensive human resources with what starts to look like affordable capital outlays. Think of the self-checkout scanner at the grocery store.
There are other new examples being developed. For restaurant servers, iPad applications could be a death knell. Customers could order electronically at the table direct to the kitchen. At the end of their meal, they would be able to pay via the same technology. The only thing missing in this scenario is the server.
Cooks could also go the way of the dodo. Recently, a San Francisco company announced the creation of a new robotic burger-maker that does the work equivalent of three full-time human employees. For fast food restaurants, this could be the wave of the future; for fast food employees, it could be the thing that costs them their job.
The only thing standing between these employees and the unemployment line is the slim profit margin -- most often less than a nickel for each sales dollar -- that keeps service industries in the black. With the right nudge -- i.e., President Obama's 24 percent suggested hike in the minimum wage or the looming costs of Obamacare -- the technological gains that correspond to low-wage job losses could be closer than you think.
It shouldn't come as a surprise that union officials at the AFL-CIO and elsewhere are behind this push. Unions, after all, are the same organizations that drove American companies like the automakers, the airlines, the steel industry and others either offshore or into bankruptcy with their unreasonable wage and benefits demands.
Our legislators need to realize that if labor-backed activists win this battle, then hundreds of thousands -- if not millions -- of entry-level and low-wage workers will stand to lose their jobs.
At that point, the discussion won't be about the minimum wage. It won't even be about the average wage or the living wage. It will ultimately come down to any wage at all for some. Unlike Big Labor's story, this isn't fiction -- it's a fact.
Richard Berman is the executive director of the Center for Union facts.
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