- - Monday, August 29, 2016


Wegmans grocery has “essentially” pulled out of a major planned expansion in Washington, D.C. It was reported last week that the decision factored in the city’s newly passed $15 minimum wage and other potential forthcoming labor mandates.

The news is deja vu for D.C. Mayor Muriel Bowser, who was “blood mad” earlier this year after Wal-Mart announced it was pulling out of two planned locations in the District also partially due to a higher starter wage and labor regulations.

Both retailers would have brought job opportunities and economic development to the region. Now D.C. residents and those who wanted jobs are the most recent casualties in the Fight for $15.

Preliminary evidence also rolled in last week showcasing how D.C.’s minimum wage hike has impacted existing small businesses. Economist Mark Perry analyzed new Bureau of Labor Statistics data to estimate that D.C. restaurants lost 1,400 jobs since January, the biggest six-month drop since 2001.

Elsewhere, similar consequences are also being experienced. Last month, economists at the University of Washington released an analysis of Seattle’s $15 minimum wage. They found the wage hike had “lowered employment rates of low-wage workers” by roughly one percentage point, relative to similar regions that didn’t raise wages, and had only a negligible impact on earnings.

And this month, the New York Post reported that American Apparel was planning on leaving its well-publicized Los Angeles home partially because of the city’s $15 minimum wage. The company is eyeing North Carolina or Tennessee, where the starter wage is $7.25.

The Chicago Tribune has reported that the local Mexican restaurant Cantina 1910 is closing partially because of Chicago’s $10.50 starter wage, which has increased by 27 percent over the last two years. “Unfortunately the rapidly changing labor market for the hospitality industry has resulted in immediate, substantial increases in payroll expenses that we could not absorb through price increases,” said the owners. That is not an unusual story. You can read many more on Facesof15.com.

These current stories reinforce the long-standing economic consensus on the effects of wage mandates. A review of past minimum wage increases released by the Federal Reserve Bank of San Francisco finds that “a higher minimum wage results in some job loss for the least-skilled workers — with possibly larger adverse effects than earlier research suggested.”

How then do wage hike proponents who claim the mandates would be consequence-free, respond to the overwhelming evidence of harm? They use the magician’s craft of misdirection by pointing to the overall health of the economy as “proof” that wage hikes have no negative impact. Labor union-funded Media Matters responded to the University of Washington report by pointing out that Seattle’s overall job-growth rate has been triple the national average.

To actually see the real impact of wage hikes, you must look at how the entry-level labor market is faring. And when we do that, we see a tale of two cities. While it may be the best of times for those working in finance or the tech sector, it’s the worst of times for entry-level jobseekers. The much smaller entry-level universe has its damage masked when you only look at the economy as a whole.

Academic literature is increasingly showing the importance of these first jobs on both lifetime earnings and societal well-being. A 2014 study in the journal Science finds that Chicago teens who participated in a summer jobs program were 43 percent less likely to be arrested for violent crimes nearly one year later. This finding is of particular relevance at the moment with violent crime increasing in major cities nationwide.

And a study by economists at the University of Virginia and Middle Tennessee State University found that those who have part-time jobs in high school earn 20 percent more annually later in their careers.

Hopefully, leftist wage hike proponents will one day realize that before you can get a good job, you need a first job. History suggests however, one should not hold their breath waiting.

Richard Berman is the president of Berman and Company, a public affairs firm in Washington, D.C.

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