Businesses are free to increase wages

Published on Friday, 13 September 2013 21:38 - Written by

Would you like fries — and a complacent sense of social responsibility — with that? Perhaps that’s the question we’ll be hearing from the drive-through speaker soon.

As debate continues about wages for fast food workers, and whether the federal and state governments should raise the minimum wage, arguments in favor are being framed as “socially responsible.”

And that’s true, as far as it goes. But it only goes as far as businesses that choose to pay their workers more.

The Daily Beast (the website that used to be Newsweek) spotlights a Detroit restaurant called Moo Cluck Moo.

“In an industry that treats labor as a commodity, co-owners Brian Parker and Harry Moorhouse decided to turn the conventional wisdom on its head,” reporter Daniel Gross says. “They’d start workers at $12 an hour, and design their business so that it could run profitably at those wages. Rather than take advantage of the epic slack in the Detroit-area labor market, they’d aim to set a slightly higher standard.”

The move gained the restaurant a lot of free publicity, and now they’re doubling down on the strategy.

“Brian Parker says that beginning October 1, the company will start employees at $15 an hour,” Gross says. “That’s a 25 percent increase from $12, and it represents the living wage level that workers are demanding and that many critics regard as foolish.”

Good for him. We’ll watch, with interest, to see how his experiment turns out.

But raising the mandatory minimum wage is another conversation altogether. It would hurt the poor and the young by reducing the number of jobs available to them. That’s just the economic reality.

“A higher wage is great for the workers who keep their jobs; it isn’t so great for those who wouldn’t get hired because McDonald’s Corp. starts asking its existing workforce to do a bit more,” writes Caroline Baum for Bloomberg news service. “With a higher minimum wage, the cost of automating certain tasks suddenly becomes more affordable. Raising the minimum wage to lift people out of poverty has the opposite effect.”

When fast food workers held a strike last month, one worker appeared on CNN to talk about his job of 24 years — delivering pizzas. CNN’s Carol Costello asked him the obvious question — what’s he doing delivering pizzas for a quarter of a century?

“I happen to like my job,” he answered, before moving on to discuss income inequality.

The point here is that there aren’t many people like Thomas McGinnis. For most people, minimum wage jobs are their starter jobs. It’s a documented fact that most workers who start at minimum wage get raises within a year. They earn them by learning to be more productive.

A 2012 study by Joseph Sabia of San Diego State University and Robert Nielson of the University of Georgia found “no statistically significant evidence that a higher minimum wage has helped reduce financial, housing, health, or food insecurity among the poor.”

Businesses like Moo Cluck Moo are free to pay their workers what they want. Others must remain free to pay what they can.