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August 28, 2015

Liberals Balk at Paying Cost of ‘Living’ Wage

As it turns out, liberals refuse to put their money where their mouth is … literally.

Earlier this year, labor unions in Los Angeles whipped up low-wage workers into a frenzy with demands for a minimum “living” wage of $15 per hour. They achieved their goal and the $15/hour wage bill was signed into law. This was supposed to be a huge victory for the workers (though, it should be noted, that within days of the law going into effect, the same labor unions that lobbied for the $15/hour minimum wage were lobbying government for an exemption for union companies, so that union companies could pay well below the new minimum wage).

Even so, some California business owners decided to show solidarity with the cause of low-wage workers, significantly increasing their starting wage of their own volition.

Vic Gumper, owner of Lanesplitter Pizza (with stores in Albany, Berkeley, Oakland, and Emeryville, California), voluntarily raised wages for his employees to between $15 to $25 per hour. In order to cover the cost of the higher “living” wage, Gumper began advertising $30 “living wage pizzas” to his customers, which include patrons from the Pixar Animation Studios and biotech companies located near his shops. In doing so he declared these pizzas “sustainably served, really … no tips necessary.”

The result? Sales have dropped by 25% as liberals in these communities have balked at having to pony up more money for the pizzas. The hit has been so significant that Gumper has had to close during lunch hour at several locations (think about that — a restaurant that has to close during LUNCH because it can’t afford to stay open!).

Gumper says that “The necessity of paying a living wage in the Bay Area [which has one of the highest costs of living in the nation] is clear, so it’s hard to argue against it, and it’s something I’m really proud to be able to try doing… At the same time, I’m terrified of going out of business after 18 years.”

As noted in the L.A. Times, Berkeley approved an increase last summer that raised the minimum wage to $12.53 by 2016, and last November voters in San Francisco and Oakland easily approved huge jumps in the minimum wage, up to $12.25 this year before continuing on to $15/hour in the next few years. Berkeley is attempting to show that they are crazier than the rest, with the city council scheduled to consider a proposal next month that would add paid sick days and additional increases to the minimum wage, rising to $19/hour by 2020, with annual cost-of-living raises from then on out.

This oh-so-predictable cause-and-effect is playing out all over California and Washington state (where Seattle also implemented the $15/hour minimum wage). Some restaurants have been forced to close because they were simply not able to absorb the higher labor costs, and (as we see above) customers were not willing to pay the higher prices needed to be charged in order to remain profitable. Humorously, many of these low-wage workers, who have now seen the jump in wages from the raise, are asking their bosses to work fewer hours at the higher wage rate in order to avoid losing welfare benefits and food stamps (…um, wasn’t that the point of the higher wage? To get people off welfare and food stamps?).

In a related story, Dan Price, CEO of Gravity Payments, a Seattle-based credit card processing payment firm, this past April announced, to the cheers of leftists everywhere, that he was raising the minimum wage to $70,000 per year for all of his employees, cutting his own salary from over $1 million per year to the same $70,000 he was paying the other employees.

While his heart was certainly in the right place, his understanding of economic realities was sorely lacking. Within months, he lost several key executives, who were resentful that employees just starting, and contributing much less, were earning the same pay that they were. He also lost a number of his clients, who were fearful of rates rising due to the increased labor costs, and he was forced to rent out his house just to make ends meet. Again, all of these results were all too predictable.

As of result of these misguided policies, unemployment will increase as businesses close or lay off workers to cut costs, and the very people who were supposed to be helped by these policies are the very ones suffering the most.

At the root of the failure of liberal policies is the reality that statutory law and heaps of class warfare-driven populist rhetoric cannot change the laws of economics or human nature. Another reality is that raising wages does not result in a corresponding increase in productivity. Another is that businesses which overpay for labor will not long stay in business.

Those demanding higher wages, with no thought as to whether the raises are warranted, or its impact on the businesses who employ them, should also keep in mind that these changes do not happen in the abstract, and businesses will respond, with such innovations as automated ordering kiosks and robotic servers, which don’t go on strike, don’t get sick, and don’t demand unreasonable wage increases. When costs increase, somebody is going to pay the price.

Liberal elitists who cried alongside their low-wage brethren for this “living” wage are now nowhere to be seen when it comes to picking up the tab for the costs of the living wage. Maybe these low-wage liberals will think twice next time before making unrealistic demands. Maybe they will instead acquire jobs skills that warrant a higher wage from their employers. Maybe … maybe not.

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