Reason.com - Free Minds and Free Markets
Reason logo Reason logo
  • Latest
  • Magazine
    • Current Issue
    • Archives
    • Subscribe
    • Crossword
  • Video
  • Podcasts
    • All Shows
    • The Reason Roundtable
    • The Reason Interview With Nick Gillespie
    • The Soho Forum Debates
    • Just Asking Questions
    • The Best of Reason Magazine
    • Why We Can't Have Nice Things
  • Volokh
  • Newsletters
  • Donate
    • Donate Online
    • Donate Crypto
    • Ways To Give To Reason Foundation
    • Torchbearer Society
    • Planned Giving
  • Subscribe
    • Reason Plus Subscription
    • Print Subscription
    • Gift Subscriptions
    • Subscriber Support

Login Form

Create new account
Forgot password

Minimum Wage

Progressives Say Good Riddance to Businesses Who Can't Afford a $15 Minimum Wage

Fewer low wage businesses also means fewer job opportunities for low wage workers.

Christian Britschgi | 2.23.2021 4:55 PM

Share on FacebookShare on XShare on RedditShare by emailPrint friendly versionCopy page URL
Media Contact & Reprint Requests
reason-ro | SIPA/Newscom
(SIPA/Newscom)

Certain progressives are becoming increasingly cavalier about the economic consequences of raising the federal minimum wage to $15 an hour.

"They shouldn't be doing it by paying low wages. We don't want low-wage businesses," Rep. Ro Khanna (D–Calif.) said on CNN earlier this week when asked about whether hard-pressed small businesses would be able to absorb the mandated pay hike. "I think $15 is very reasonable in this country."

Khanna's seemingly blasé acknowledgment that the Democrats' minimum wage proposal would force some small businesses to shut down sparked immediate criticism from conservatives. Khanna later clarified his remarks on Twitter by saying he thought a $15 an hour federal minimum wage would be good for both workers and employers.

We can pay workers a living wage AND have small businesses thrive, including in rural. Putting more money in people's pockets means they spend more in local communities. You can be pro worker and pro small business. That's what most small business owners I meet believe.

— Ro Khanna (@RoKhanna) February 22, 2021

Nevertheless, other left-wing commenters approvingly tweeted out Khanna's original remarks, saying that forcing businesses who can't afford the new higher minimum wage to close would be a good thing.

https://twitter.com/davidsirota/status/1363881187924615169

https://twitter.com/helaineolen/status/1363861846885756928

 

That's a callous attitude to take towards small business owners in light of the difficulties they're already facing amid a pandemic and related public health restrictions. Given how many mom-and-pop operations would struggle to cope with a $15 federal minimum wage, these commentators are writing off a huge number of existing businesses as essentially worthless.

Nationally, about a third of small businesses have closed since the start of the pandemic. Small business revenue is down by about the same amount.

The proposed $15 an hour minimum wage, which the proposed Raise the Wage Act would phase in by 2025, is higher than the current median wage in Mississippi, notes Scott Lincicome of the Cato Institute. The figure is only a little less than the median wage in states like Arkansas, West Virginia, and Louisiana.

Making that median wage the new national floor would prove fatal for a huge number of employers in those lower-wage, lower-cost states.

And even if one isn't inclined to shed a tear for mom-and-pop businesses, it's not like the current lower-wage employees of those businesses would be made better off either. They'd stand to make $0 an hour if their employer shuts down. And even if the business does survive, those employees still risk cuts to their hours or worsening working conditions.

That's what's playing out in Fresno, California, where the rollout of that state's $15 an hour minimum wage law was the subject of a recent investigation by The New York Times.

As that story notes, Fresno, as a lower-wage, lower-cost area of a higher-wage, high-cost state, makes for a good case study on how the phase-in of a $15 an hour federal minimum wage might work.

In January, California hiked its minimum wage to $14 an hour. Businesses in Fresno, where the median wage is $17 an hour, have responded by either raising prices, cutting staff, or both, the Times found.

The Congressional Budget Office estimates a $15 an hour national minimum wage would cost 1.4 million people their jobs.

A similar story is playing out in West Coast cities that have passed hazard pay ordinances that require grocers to pay their employees an additional $4 or $5 an hour during the pandemic.

Some grocery store chains have responded by closing down poor-performing stores. Independent operators say they're being forced to operate in the red, and might not survive for much longer. According to a city staff analysis, a proposed $5 an hour hazard pay proposal in Los Angeles would risk price hikes, job losses, store closures, and the creation of "food deserts."

Grocery stores are particularly sensitive to sudden increases in their labor costs given the typically tight margins those businesses operate on. That's true even during the pandemic when some grocery chains have reaped record profits.

Small businesses experiencing declining revenue during the pandemic would obviously be harder hit by sudden increases in their labor costs.

Even if one thinks it's fine for businesses that pay low wages to go extinct, their shuttering also means fewer job options for low-wage workers. There's no social justice in that.

Rent Free is a weekly newsletter from Christian Britschgi on urbanism and the fight for less regulation, more housing, more property rights, and more freedom in America's cities.

This field is for validation purposes and should be left unchanged.

NEXT: We Should Keep Expanding Telehealth, Even After the Pandemic

Christian Britschgi is a reporter at Reason.

Minimum WageSmall BusinessUnemploymentCongress
Share on FacebookShare on XShare on RedditShare by emailPrint friendly versionCopy page URL
Media Contact & Reprint Requests

Show Comments (228)

Latest

The App Store Freedom Act Compromises User Privacy To Punish Big Tech

Jack Nicastro | 5.8.2025 4:57 PM

Is Shiloh Hendrix Really the End of Cancel Culture?

Robby Soave | 5.8.2025 4:10 PM

Good Riddance to Ed Martin, Trump's Failed Pick for U.S. Attorney for D.C.

C.J. Ciaramella | 5.8.2025 3:55 PM

Trump's Tariffs Are Already Raising Car Prices and Hurting Automakers

Joe Lancaster | 5.8.2025 2:35 PM

Trump's Antitrust Enforcer Says 'Big Is Bad'

Jack Nicastro | 5.8.2025 2:19 PM

Recommended

  • About
  • Browse Topics
  • Events
  • Staff
  • Jobs
  • Donate
  • Advertise
  • Subscribe
  • Contact
  • Media
  • Shop
  • Amazon
Reason Facebook@reason on XReason InstagramReason TikTokReason YoutubeApple PodcastsReason on FlipboardReason RSS

© 2024 Reason Foundation | Accessibility | Privacy Policy | Terms Of Use

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

r

Do you care about free minds and free markets? Sign up to get the biggest stories from Reason in your inbox every afternoon.

This field is for validation purposes and should be left unchanged.

This modal will close in 10

Reason Plus

Special Offer!

  • Full digital edition access
  • No ads
  • Commenting privileges

Just $25 per year

Join Today!