It’s an unhappy New Year for many entry level employees in nearly half the country. On New Year’s Eve and New Year’s Day, 19 states and 23 localities are raising their starter wages and thus reducing their job opportunities for those with few marketable skills.
In New York State and California especially, a mind-boggling patchwork of minimum wage increases are taking place. In New York State, starter wage increases are dependent on business size, location, and type. That means businesses face 14 different new wage mandates. California businesses face 13 on New Year’s Day.
The labor union-backed National Employment Law Project couldn’t even get its year-end tally of wage hikes correct. If it can’t keep track, and it is getting paid to do so, think how complicated (and political) wage dictates have become. Is it ironic that this all is happening on the 25th anniversary of the breakup of the U.S.S.R.
Many small businesses have seen the minimum wage writing on the wall and are trying to take offsetting measures to absorb it. Last month, Competitive Edge, a San Diego communications firm, announced it was moving 75 call center jobs to El Paso, Texas because of California’s wage hike. Ashley Furniture recently moved production out of its California plant, which employed 840 people.
Not every business can move across state lines. In the Bay Area, local restaurants continue their year-end “death march” – to quote a December San Francisco Eater headline – with dozens of closures. Many of these – including The Advocate, Radish, and Semifreddi’s – have been attributed in part to government dictated wage increases.
In Washington State, which passed a $13.50 starter wage on Election Day, there are numerous stories of small business owners struggling to comply. In Seattle, Louisa’s Caf closed after 20 years in business because of minimum wage costs. According to the owner, “Unless [customers] want to pay $15 or more for just a BLT or grilled cheese sandwich” there’s no way to remain in business.
Across the Cascades, a Yakima day care that employs 23 will likely close by 2018 because it can’t absorb the new wage costs. The owner predicts a mass closure of state childcare centers, which run on notoriously low profit margins, given the inability to pass on to parents the dramatic wage hike. Further east in Spokane, a day care center is raising its prices by $140 per month, or 20 percent, to try to absorb the new wage costs.
These are just a few stories from the past couple of months alone. Sadly there are too many to reveal here. You can read many more at Facesof15.com.
The harm caused by starter wage increases is not just anecdotal. The economic literature points to a one percent drop in youth employment for every 10 percent increase in the minimum wage. Youth employment rates are currently at crisis levels, with only one in three people and one in five black youth aged 16 through 19 working. Youth employment rates are still well below their pre-recession level, partially as a result of recent wage mandates that outlaw employment that once provided a port of entry into the world of work.
The consequences of a lost generation of starter jobs go beyond the value earned from a paycheck. They include the loss of valuable training opportunities that allow young employees to earn the soft skills including time management, working as part of a team, and customer service. And these are not dead end jobs or those who want to advance. Economists find that roughly two out of three starter wage employees get a raise within their first several months on the job. They also find that those with early-career work experience earn 20 percent more than their counterparts later in their careers.
The consequences of jobs moving to self-service or simply disappearing have broader societal implications. Violent crime is on the rise in major U.S. cities. Last week, The Wall Street Journal reports that 16 out of the 20 largest police departments note a year-over-year increase in murders. And of the four that decreased, three – Baltimore, Milwaukee, and Washington D.C. are outliers – they had increased murders by more than 50 percent in 2015.
The academic connection between joblessness and violence is well-documented.
A recent study published in Science found that teens with summer jobs committed violent crimes at about half the rate of the control group. Darrel Stephens, executive director of the Major Cities Chiefs Association, cited high unemployment as a factor driving the violent crime epidemic.
Voltaire said, “Work keeps at bay three great evils: boredom, vice, and need.” Expect all three to increase in the New Year in tandem with minimum wage increases.