Note: This post first appeared in the Iowa City Press-Citizen during the original minimum wage debate on August 24, 2015.
Ever since I stood up at the Board of Supervisors’ meeting and said "I’m a small-business owner who favors raising the minimum wage," I’ve been getting a lot of feedback — on social networks, on the street, and in my restaurant. A lot of it was very positive, but some of it was: “How can you favor increasing your costs?” “It will force you to lay people off!” “Your taxes will go up too!”
Some of that is true, some of it is partly true, some of it is outright false. It is true that if the wages I pay go up, then my payroll taxes will go up correspondingly. This will not force me to lay people off, though. The fact is, my operating expenses are always going up. Different categories on my expense ledger go up different amounts at different speeds, but they all — over the nearly 19 years Devotay has been in business — they all go up.
I do business a little differently than some in the industry. I believe I have the best crew in town, and part of the reason for that is that I pay them well. In an industry where staying at the same job for a year makes one a veteran, my place has staff members who have been with us for eight, ten, thirteen years. And I’d like to pay them more, but there’s a level at which it puts me at a competitive disadvantage, because the other restaurants would then have even lower comparative labor costs. If the minimum wage is raised across the board, it affects us all equally.
Minimum wages and taxes going up or down will not affect who or how I hire or fire. Raise the wage and I will fire no one. Cut my taxes to zero and I will hire no one. Only one thing causes me to hire more staff: more guests walking through my door. When the minimum wage is raised, people have more money to spend. They spend it, for example, getting their hair cut or finally getting their muffler fixed. Then that barber or that mechanic has a few more bucks and can finally take his/her spouse out for a nice dinner.
This effect is compounded if those people are wise enough to spend their money at other small, locally-owned establishments, because the economists tell us that that kind of spending will stay in our economy and roll over up to 3.5 times. That supports your neighbor’s kid’s dance lessons or football camp. It helps your friend at the local dress shop get textbooks for her kid. If you spend it with a large, multi-national corporation, it supports some distant CEOs eight-figure salary, something no one seems to mind paying for.
Will my prices go up? Possibly, on some items, but not very much. If they do, though, can you think of a better reason for them to go up? So that your neighbors will make a little more money? Isn’t that a better reason than oil commodity fluctuations or CEO benefit packages?
Opponents to the Johnson County wage hike proposal say it will kill jobs, and cite the example of Seattle. The thing is, when they raised the minimum wage there, it didn’t kill jobs. Opponents cite a study by the conservative American Enterprise Institute. But Erik Sherman in Forbes (no bastion of Liberalism, Forbes) showed clearly how AEP’s methodology was terribly flawed. There was a minor tick downward in an upward trend of restaurant jobs that statistically speaking was perfectly normal regardless of the wage hike. A classic case of post hoc ergo propter hoc.
America has had a minimum wage since the 1938 Fair Labor Standards Act. Yet somehow, despite it being raised at a federal level 29 times under almost every president, America continued to build the largest economy and the wealthiest nation the world has ever known.
In a time when CEOs and Wall Street financiers can bring home nine-figure salaries, it is immoral to begrudge the poorest among us a livable wage.