The Human Cost of a Minimum WageBy William McGurnFeb

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The Human Cost of a Minimum WageBy William McGurnFeb. 15, 2021

Workers have more to fear from well-meaning pols than from capitalism.

As these things always do, it started out with the best intentions. In January the City Council of Long Beach, Calif., adopted an ordinance requiring large grocery-store chains to pay employees an extra $4 an hour. The idea was to reward them for the risks they took by doing their jobs amid the Covid-19 pandemic.

It didn't turn out that way. In response to the ordinance, Kroger Co. announced it would close two Long Beach supermarkets. Once again, workers were sacrificed to greed. As local union leader John Grant told the Washington Post, "it's reckless capitalism run amok."

But is it?

As one of the world's largest retailers, Kroger makes an easy villain. But instead of blaming "reckless capitalism," might the fault lie with the reckless politicians who passed this measure? Thanks to their intervention, instead of finding an extra $4 an hour in their paychecks, nearly 200 grocery workers will now have no paychecks at all unless they are transferred to another store or find another job. It's but the latest illustration of economist Thomas Sowell's dictum that whatever a government might set it at, "the real minimum wage is always zero."

What happened to these workers is worth bearing in mind as Congress debates whether to raise the federal minimum wage. For though the Long Beach ordinance was called "hero pay" and meant to be temporary, it operated as a minimum-wage increase for the affected grocery workers. And just as the Long Beach City Council passed it unanimously and without much thought that it could end up doing more harm to these workers than good, those now pressing Congress to include the $15-an-hour federal minimum wage in its Covid-19 relief package ask us to believe the costs would be nonexistent or minimal.

This argument took a hit last week when the Congressional Budget Office crunched the numbers. It found that raising the federal minimum wage to $15 an hour by 2025—more than doubling it from $7.25 today—would lift 900,000 Americans out of poverty over the next four years. But this would come at the cost of putting 1.4 million other Americans out of work. It's reasonable to quibble about the findings or question the models and assumptions. But the point here is that there are real costs that should not be denied.

Even some Democrats worry that a one-size-fits-all federal wage mandate may be too blunt an instrument. West Virginia Sen. Joe Manchin says he's open to an increase in the federal minimum wage—but to $11, which he says would be "responsible and reasonable" for his state. No doubt he appreciates that West Virginia would find $15 harder to absorb than businesses in, say, high-priced New York or Los Angeles.

Kyrsten Sinema is another Democrat with doubts. In an interview with Politico, the Arizona senator said the Covid spending bill should be confined to short-term relief—and that the budget reconciliation process isn't the way to set the minimum wage. That's important because Democrats have no Senate votes to spare. Either Mr. Manchin or Ms. Sinema could take down the whole relief package if it includes the $15 minimum wage. Even Joe Biden, who campaigned on it, has said he's not sure the minimum-wage hike will survive the Senate.

Byron Donalds has his own concerns, about the proposal itself as well as the quality of the economic debate over it. Mr. Donalds, a Republican, is the new representative for Florida's 19th Congressional District, and brings to his job a background in finance.

"If a $15-an-hour federal minimum wage doesn't work during Covid," he says, "it doesn't work any time. The laws of economics don't change during a pandemic." He adds that "politicians have no way to value labor."

By this he means that a minimum wage is a price, and that when you make it more expensive to hire workers, you price some of them out of the job market. These are also the people who can least afford it. As the New York Times noted in 1987—when it editorialized that the "right" minimum wage is zero—"those at greatest risk from a higher minimum would be young, poor workers, who already face formidable barriers to getting and keeping jobs."

It's true that the costs of raising the minimum wage vary depending on conditions, and the costs won't always translate directly into dramatic job losses. There are many ways businesses can absorb these costs: by raising prices on their consumers; by replacing employees with machines; or by reducing hours, which in some cases could mean that workers make more per hour but less each week.

"Calls to raise the minimum wage to $15 an hour will be a disaster for our nation, especially amid economic hardship brought on by the global pandemic," Mr. Donalds says. "The American people are tired of paying the bill of coastal politicians' progressive wishlist."

Just ask those grocery workers in Long Beach.

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