Earlier in the year, San Francisco raised its wage prohibition to $10.55 per hour, thereby legally preventing businesses from hiring workers who produce a marginal benefit of less than that amount without the business incurring losses. Not wanting to fall behind, a coalition of Seattle fast food workers, political bleeding hearts, and a nationalistic entrepreneur are coming together to punish more low-skilled, and uneducated workers by raising the minimum-productivity level from $9.19 to $15 per hour.
If the city council cedes to these demands, local businesses will be forced upon the threat of fine to employ workers who are at least 61% more productive than their currently least productive laborers. This will lead to massive layoffs and employment consolidation as cashiers, baggers, waiters, and other jobs are eliminated to fit under the prohibition. As a result, businesses will face crippling costs as lower employment decreases their productivity, thereby reducing profits, and probably even shoving some businesses into insolvency. Consumers could look forward to fewer restaurant and grocery choices and eventually higher prices.
The restaurants and stores at which these low-skill individuals are employed are also typically where they do most of their shopping. As the prohibition becomes stronger, they should be expecting higher prices in the long run, thereby increasing the demand for greater and greater prohibitions.
Members of “Good Jobs Seattle,” a “grassroots” fast food worker organization began striking earlier this year. Since then, the movement has initiated contact with the city government so that their possibly legitimate wage demands can be forced upon their employers involuntarily. Most of these workers are probably unaware that they are campaigning for the elimination of their own jobs, but for some, raising the productivity prohibition could produce tremendous windfalls as fellow employees are fired and a minority of employees pick up the remaining work.
As John Miller, the CEO of Denny’s (DENN) points out, the prohibition would not only punish low-skill workers, but it would also prevent them from gaining the skills necessary to earn more money. Low-skilled individuals typically work low wage jobs temporarily while they develop a resume and new abilities, so that they can move on to more advanced working positions, or even management. However, with the productivity prohibition in place, these workers will be stopped from improving their own human capital. The only existing alternatives for such individuals are charity, welfare, and crime. Fortunately for the soon to be unemployed, the latter two will be expected to increase in correspondence to the increase in the prohibition rate.
John Burbank, an economist for the Economic Opportunity Institute, agrees with the fast food workers: “Unemployment has dropped below 5 percent in the city of Seattle. It is a really good time to address these issues and raise wages across the board because that results in important local economic activity.” In other words, Burbank believes that voluntary labor contracts and wage trends should should fall under the purview of the state and should be subject to central planning.
Furthermore, Burbank charges that raising the costs of business, especially the marginal costs of production, will have a positive impact on the economy as a whole. Restaurants will be more productive when every hamburger and French fry costs more money to create.
Hopefully, the Seattle city government will reject this ban on low-skill workers and let independent individuals voluntarily make their own contracts. Otherwise the city government will further oppress their least well-off citizens, and by extension, make the entire city poorer and less free.