The recent push to raise minimum wage across the country has reached its boiling point in the District of Columbia. The proposal to raise the minimum wage to $15 per hour put forth by Mayor Muriel E. Bowser back in April was unanimously adopted by the D.C. Council earlier this week. The proposal will increase the minimum wage from its current level of $10.50 by $0.70 per year until reaching the $15 mark by 2020. The proposal also includes a phase-in increase to $5 the minimum wage for tipped workers, currently set at $2.77.
Originally interested in a ballot measure to increase the minimum wage to $15 per hour across the board for all workers, tipped included, the district’s largest labor unions have decided to abandon their fight for the ballot measure since the council agreed to vote in favor of the $15 increase for most workers, and increase tipped workers to $5 per hour as well. However, not all restaurant worker advocates are happy with this proposal. One group in particular, the Restaurant Opportunities Center, is not abandoning the goal of $15 per hour for all workers.
Combating poverty is the ultimate goal of a minimum wage increase. What is left out of this idealistic narrative is that a raise in minimum wage actually has a negative effect on employment rates. Since employment is the best path out of poverty, increasing the minimum wage will actually hurt those it is intended to help. This has been proven time and again by states that have implemented wages above the federal minimum and have dealt with the job losses that result. People below or near the poverty line, new and less experienced workers entering the labor force, and small businesses alike will be adversely affected by an increase in minimum wage.
Many small businesses cannot afford a raise in the minimum wage and thus the added costs will have to be compensated for by a reduction in employee hours, layoffs or passed to the consumer in the form of higher prices. But while the effects of a $15 minimum wage are particularly difficult for small businesses to survive, all employers are affected. A recent report from the Employment Policies Institute found nearly half of Washington employers have already reduced staff or reduced hours in response to minimum wage increases since 2014. In 2014, district lawmakers voted to increase the minimum wage from $8.25 per hour to $10.50 per hour (set to increase to $11.50 on July 1, 2016), and employers are evidently still reeling from those increases.
Washington’s minimum wage increases are deterring big businesses as well; namely, Walmart. For a government that claims to be trying to help lower income earners, they are keeping away a business that saves consumers $263 billion a year. Raising the minimum wage as well as complying with other district laws requiring payment into family and medical leave funds is not a sustainable business model for the low-price retailer. In fact, earlier this year, the company cancelled its plans to open new stores in poorer neighborhoods, citing increased costs. With costly mandates and one of the nation’s highest minimum wages, it will likely be some time before the district can attract the businesses that it so desperately needs to provide low income residents an opportunity to reach the first rung of the employment ladder.
Overregulation by the local government is to blame for the poor economy, not an insufficiently high minimum wage. The D.C. Council should promote employment opportunities and foster and encourage entrepreneurship in order to obtain economic prosperity. Those advocating for more government regulation have missed the mark altogether. The answer to solving the economic crisis is increasing the amount of available and higher-paying jobs through a competitive tax and regulatory climate, while preparing the labor force for these upper level positions by ensuring that they can first get a lower-level one.
Ben Wilterdink is the director of Commerce, Insurance and Economic Development policy at the American Legislative Exchange Council. Corrie Chase contributed to this article.