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WAGE WAR: Employees and union activists protest outside Whole Foods in Chicago.
Scott Olson/Getty Images
WAGE WAR: Employees and union activists protest outside Whole Foods in Chicago.

Job killer

Money | Movement to raise the minimum wage will have unintended consequences

Issue: "Reaping a whirlwind," Aug. 24, 2013

Workers in fast food restaurants in several U.S. cities went on strike July 29, calling for higher wages, in some cases as high as $15 per hour. The nonunion workers want the right to unionize, and the campaign—focused mostly in union-friendly cities such as New York, Detroit, and Chicago—received funds from the Service Employees International Union (SEIU).

The one-day strike is part of a targeted national campaign by the SEIU and other union and liberal groups to create a so-called “living wage.” The campaign is meeting with some success, but is producing unintended consequences. Washington, D.C., officials passed a law in early July requiring Walmart and other (but not all) retailers to pay at least $12.50 per hour. Walmart had three stores on the drawing board for the District of Columbia. Those plans are now on hold. In Seattle, Mayor Mike McGinn, running for re-election, opposed upscale retailer Whole Foods’ plans to build a store in an up-and-coming neighborhood over the issue of worker wages, even though Whole Foods says it pays $16 per hour, well above the minimum wage for the state. The issue has become a significant one in the mayoral race.

Jay Richards, senior fellow at the Discovery Institute, said these battles are about politics and not economics. “Setting wages is a form of price fixing,” he said. “And the impact of price fixing is perhaps the best understood area of economics. Raising labor costs by fixing wages will reduce the supply of jobs. It’s as simple as that.”

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Richards said the irony is that “artificially raising wages hurts most the very people such policies are supposed to help: the poorest of the poor and the least skilled workers.” He said an employer willing to pay $8 per hour for a low- or unskilled worker often balks at paying $15 per hour. At that price, says Richards, the employer must hire only skilled and experienced workers: “Minimum wage and living wage laws raise the lowest rung of the ladder so high that those on the ground can no longer reach it.”

Big league spending

Jonathan Ferrey/Getty Images

It was front page news in July that Detroit filed the largest municipal bankruptcy in American history. What didn’t make the front pages was the fact that despite a long slide into financial insolvency, Detroit continued to provide financial support for its sports teams, essentially subsidizing millionaires and billionaires with taxpayer money.

The Tigers’ home stadium, Comerica Park, opened in 2000 with the help of more than $100 million in public financing. Ford Field, the Lions’ domed stadium, opened in 2002 thanks in part to $154 million in taxpayer money. The Lions, owned by Henry Ford’s grandson William Clay Ford Sr. (net worth: $1.25 billion), paid just $70 million.

The economic impact of sports stadiums—and even big league sports teams—has received greater scrutiny in recent years. Owners and promoters point to full stadiums and packed restaurants on game nights. But critics say most of the money spent would have been spent anyway, often closer to home with local entrepreneurs and restaurateurs. Andrew Zimbalist, a professor at Smith College and an authority on sports team economics said, “All of the independent, scholarly research on the issue has come to the same conclusion: A team or a facility by itself will not increase employment or raise per capita income in a metropolitan area.”

Major League Baseball’s historian John Thorn has a different perspective, though. He told Reuters, “You can show me a spreadsheet, and I’ll still trump you because it’s the psychic benefit of having a sports club. It separates a city from thinking of itself as big league or thinking of itself as bush league.”

Perhaps, but Detroit might have trouble selling that idea to a bankruptcy judge. —W.C.S.

Warren Cole Smith
Warren Cole Smith

Warren, who lives in Charlotte, N.C., is vice president of WORLD News Group and the host of the radio program Listening In. Follow Warren on Twitter @WarrenColeSmith.

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