Minimum Wage

St. Louis Fights Reality, Boosts Minimum Wage

Job losses and price increases are on the horizon.

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St. Louis
Daniel Schwen / Wikipedia

A massive minimum wage hike went into effect in St. Louis today, hiking hourly pay from the Missouri state minimum of $7.70 to $10 overnight, and raising fears of job losses and price increases.

Some 21 cities increased their minimum wage on January 1st of this year.

Reason has previously reported on how these city-level minimum wage laws often just shift jobs from high priced localities to cheaper neighboring cities, as happened in Washington DC, which shed 1,400 restaurant jobs after adopting a $15 minimum wage in 2016, while neighboring suburbs in Maryland and Virginia added 2,900 restaurant jobs during the same time period.

The St. Louis minimum wage increase was initially approved by city's Board of Alderman back in 2015, but has since been held up by a lawsuit brought by the Missouri Chamber of Commerce which alleged that a city level wage hike violated state law.

That argument was shot down back in March by the Missouri Supreme Court, and on Thursday a St. Louis Circut Court lifted an injunction it had placed on the law, allowing it to go into effect immediately.

"In the short run, it will require businesses to scramble to comply with the new law," said Missouri Chamber of Commerce president Dan Mehan in reaction to Court's lifting of the injunction. "In the long run, it will cost jobs and set an already struggling St. Louis City economy even further behind."

St. Louis's unemployment rate stands at 4.7 percent in March 2017, compared to a state unemployment rate of 3.9 percent statewide, and it does indeed seem likely that this most recent wage hike will only grow that gap.

Surrounding Missouri communities will still be abiding by the statewide $7.70 minimum wage, and neighboring Illinois $8.25 rate will now also be lower, attracting employers and investment looking to avoid St. Louis's pricier labor market.

Such concerns were voiced by St. Louis area businesses when the law was first passed back in 2015.

"People are going to go across the street to Maplewood," one bakery owner was quoted as saying in a 2015 Riverfront Times article, referring to the inner-ring suburb town adjacent to St. Louis.

Not helping St. Louis's labor market prospects either is the severity and speed of this wage increase. At 23 percent, St. Louis's minimum wage increase represents the sharpest hike to be implemented in 2017.

The state of Arizona comes in at a close second when its voter-approved minimum wage increase saw wages rise just under 20 percent–from $8.05 to $10 an hour—in January 1st of this year.

As has been reported, that sharp increase has caused severe hardship for state funded providers of disability services who have seen their labor costs go up without a commiserate rise in funding to offset those costs.

The predictable result has been cuts to service levels for poor and disabled Arizonans.

Thankfully St. Louis's minimum wage law does include some provisions which will help mitigate negative employment consequences of the law.

The new $10 rate does not apply to businesses that take in under $500,000 per year or who hire fewer 15 people, so the smallest and most vulnerable businesses will be somewhat shielded from the effects of the law.

This provision also gives those businesses a perfect incentive to just not hire that 16th person.

There is also a bill working its way through the Missouri Legislature that would block cities from raising their minimum wages over the state's minimum wage. The bill passed through the Missouri House, but is currently stalled in the senate waiting for a vote.

If it does pass, St. Louis's experiment in sudden wage hikes will be a decidedly short-lived one.

That will be good news for St. Louis workers and business owners alike. Regardless of the rhetoric spewed by $15 Now activists, raising the costs of something encourages people to buy less of it.

Baltimore's Mayor Catherine Pugh understood this well when she vetoed a $15 minimum wage bill, despite having campaigned such a proposal. "I believe it is in the best interest of the city that we follow the state," said Pugh following her veto.

Raising the costs of employment particularly in locality surrounded by lower wage communities is nothing but a recipe for job losses and business relocations.

Cities like Washington DC have learned this the hard way, and barring action by the Missouri Legislature, St. Louis will follow their example.

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  1. The new $10 rate does not apply to businesses that take in under $500,000 per year or who hire fewer 15 people, so the smallest and most vulnerable businesses will be somewhat shielded from the effects of the law.

    Pro-tip to St. Louis employers: a robot doesn’t count as an employee

    1. Who is going to shield those vulnerable businesses from the effect of all their employees quitting to find work at larger businesses?

      1. Illegal immigrants?

      2. What jobs at larger businesses?

  2. These fucks are so disingenuous. Even our governor of California conceded it makes no economic sense and will cost jobs, but hey, “fairness”

    1. A policy that directly harms the poor isn’t what I would consider fair. But maybe I’m just living in the false consciousness called reality.

  3. There is also a bill working its way through the Missouri Legislature that would block cities from raising their minimum wages over the state’s minimum wage.

    Would that not effectively make a single, statewide minimum wage?

    And am I the only one troubled by the still relatively low $15 minimum? I would like to see the science behind that calculation to see exactly how they determined that universally that was enough for anyone and everyone to live on.

    1. If you can’t live your life on $15 an hour, maybe it isn’t worth living.

      1. We know that if your job can’t pay you $15 an hour it’s definitely not worth having that job.

    2. I make slightly less than $15 an hour and support my wife and 2 kids just fine on it. Maybe it depends on the region.

  4. “As has been reported, that sharp increase has caused severe hardship for state funded providers of disability services who have seen their labor costs go up without a commiserate rise in funding to offset those costs.” — Now there’s a Freudian slip if I ever saw one!

  5. Commensurate, not commiserate.

    I apply for the job of proofreader at Reason. This isn’t the first time you’ve badly needed one.

    1. Autocorrect? Those don’t seem like easy words to mix up. I hate autocorrect.

  6. . Regardless of the rhetoric spewed by $15 Now activists, raising the costs of something encourages people to buy less of it.

    Nuh uh. Intentions are what matter. Using taxes to raise the price of things like tobacco and sugary drinks encourage people to buy less of it because that is the intention. Raising the cost of unskilled labor is not intended to encourage employers to buy less of it, so when that happens it’s because of capitalist greed, not the absurdly high minimum wage.

    Duh.

  7. The good news is… EVERYONE is boosting it, so greedy, unscrupulous employers won’t be able to flee from it. Which means everything will be expensive everywhere again.

  8. The new $10 rate does not apply to businesses that take in under $500,000 per year or who hire fewer 15 people, so the smallest and most vulnerable businesses will be somewhat shielded from the effects of the law.

    Somewhat is a good way to describe it. Don’t grow or attempt to employ more people, lest you squeak over that line and jack your cost of employment through the stratosphere.

    1. Structure each location as a separate LLC.

    1. Doesn’t more money in Venezuela just mean more paper to burn for warmth at this point?

    2. FEE had an article that was just a roundup of every dumb move Venezuela has made and how bad things have gotten there, and I couldn’t make it to the end. It was genuinely disturbing

      The Nation had a horrific article citing a bunch of idiots who basically said only the rich were protesting Maduro, and one of the root causes of this whole thing is just that Maduro isn’t Chavez. I also couldn’t make it to the end. I’ve seen a few out-and-proud socialists now try to make this argument that Venezuela’s unrest is due to not just oil prices but also some vast right-wing conspiracy to tank the economy and return to being the mustache-twirling billionaires they were before Chavez

      1. Rachael Maddow told me the unrest was because of Trump.

    3. The new wage he announced Sunday will apply to a range of professions, including teachers, doctors, firefighters, police and military personnel.

      Every comrade makes that same peanuts, in true commie fashion.

      1. “the” same

  9. An increase from $7.70 to 10 is not a 23% increase. It’s an increase of almost 30%. The wage increased by $2.30, and $2.30 is 29.87% of $7.70.

    Arizona’s increase from $8.05 to $10 is a 24% increase, not “just under 20 percent”.

    I love reason.com, but you all are no better at math than any other journalists.

    1. Arizona’s increase from $8.05 to $10 is a 24% increase, not “just under 20 percent”.

      Ha! Good catch. I stared at that for a sec and I know exactly where they made their mistake.

    2. Hah I can top that. My local paper reported a hotel visitor tax increase from 2% to 4% as a “2% increase” instead of 100%.

      1. no that was intentional. see the rate went from 2 to 4, so the RATE went up by 2%.

        / liars

      2. no that was intentional. see the rate went from 2 to 4, so the RATE went up by 2%.

        / liars

  10. A massive minimum wage hike went into effect in St. Louis today, hiking hourly pay from the Missouri state minimum of $7.70 to $10 overnight

    So the guy who worked his way up to $10 an hour after three years on the job will now be making the same wage as the guy who just walked off the street? So he demands a raise to $13 an hour and creates a whole new set of problems because the guy who has been there six years and makes $16 an hour isn’t going to be happy with the outcome.

    Or the guy making $10 an hour demands less responsibility and creates a different set of problems. Now that there is a guy with three years experience willing to do the entry level work there is no need for the guy who just walked off the street.

    Yeah Progressivism! Creating a legion of wards of the state one dependent at a time.

    1. Yes, this has been discussed, and been proven true, by the way.

      When you raise the minimum wage to $15 an hour, everyone making $18.75 just got a pay cut.

  11. The real minimum wage is $0.

  12. They finally came up with a good plan to revitalize East St. Louis.

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