JLF Triangle Blog

“a deliberate attempt to achieve a political agenda at the expense of small franchise businesses owners”

Seattle has passed a job-killing hike in the minimum wage to $15 per hour. Franchisees are fighting back.

Franchises are not small businesses, and a lawsuit against the city of Seattle will prove it, says the International Franchise Association.

The Washington, D.C.-based organization said Monday it plans to sue the city for passing an ordinance it calls discriminatory, which requires franchise owners to raise wages for their employees as quickly as big businesses such as Microsoft raise theirs.

The council voted Monday afternoon to raise the wage to $15 an hour in phases, with different rules for large and small businesses.

“The City Council’s action today is unfair, discriminatory and a deliberate attempt to achieve a political agenda at the expense of small franchise businesses owners,” said IFA President and CEO Steve Caldeira.

President Obama is an ardent supporter of hiking the minimum wage. In a recent column, JLF’s Roy Cordato discussed the impact of arbitrary mandatory wage hikes.

Empirical estimates by two Duke University economists suggest that for each increase of 10 percent in the minimum wage there will be a 2.9 percent decrease in the likelihood that a low-skilled worker will find employment. This means that the increase in the minimum wage being proposed by Obama and the Democrats implies almost a 12 percent decline in the chances that a low-skilled worker will find employment. For those low-skilled workers who start out severely disadvantaged in the marketplace, this would be just one more obstacle placed in their path.

Advocates of minimum wage laws ignore the economic analysis and the idea that there is any relationship between productivity of the worker and wages paid. They buy into the myth that people’s wages can simply be raised and poverty can be eliminated by government decree, without any change in workers’ productivity.

By assuming that increasingly higher minimum wages will cause no one to be unemployed, they are making one of two assumptions; both are absurd. They are assuming either that there is no one in the labor force whose skills are so low that they cannot command the higher wage or that employers simply ignore worker productivity when considering the cost of hiring a worker.

Low wages define poverty; they do not cause it. Wages, like other prices, reflect underlying realities. In this case, the underlying reality is that there is a large and growing number of people in Obama’s economy whose skills are so low that they cannot command a wage that is higher than even the current minimum wage. The high unemployment rate for low-skilled, disadvantaged groups is the messenger that conveys this reality.

How sad for low-skilled workers in Seattle.  The very folks the wage hike supporters say they’re trying to help are the folks likely to be hurt.

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