The sound of small-business storefronts slamming closed could replace bright, ringing sounds of the holiday season as state minimum wage laws were phased in last month and in 2019. While a government-mandated pay raise might sound like the perfect New Year’s bonus, it won’t be for people who lose their jobs as a result.
In December, businesses with more than 11 employees had to start paying $15 an hour in New York state, and this month minimum wages go up in Florida, Ohio, California, and Arizona. Other states have recently hiked theirs and more may be on the way.
Such policies are particularly tragic to industrious Americans who have spent decades building businesses. Consider the adverse impacts on New York City businessman Eli Amsel and his employees.
In 2016, he told a New York State Assembly committee that he was inspired to start his own business thanks to his grandfather, a Holocaust survivor who impressed upon him the value of freedom and the opportunity to pursue the American dream. “And that's why I had this inspiration, and I made it work, and I'm here 34 years later, after toiling all these years,” he said. Amsel launched his business in 1982 from the basement of his father’s Brooklyn home.
Since then, Amsel has been selling unbranded plastic and paper bags to a variety of shop owners, and he spent decades building his client base. Certainly not a “get-rich-quick” scheme, it required driving throughout the city from one shop to another, finding the right products, and building relationships with shop owners.
He hoped to pass on this business to his three children and eight grandchildren, but that part of his dream may never materialize.
Despite the growing economy, Amsel says his business is down by 20 percent because New York’s regulatory environment is crushing him, and the minimum wage law is a huge problem.
Minimum wage laws often force employers to make tough decisions to stay afloat, such as cutting the number of employees and/or work hours. A study conducted in the state of Washington showed that minimum wage laws in Seattle actually reduced worker incomebecause employers reduced the number of hours employees could work. Some people disputethe findings of this study with questionable claims of their own, but it’s really only common sense. No one needs a study to understand that when labor costs are artificially increased, businesses have to find ways to offset them; obviously that does not help employees.
New York’s law created the perverse incentive for small businesses that have just above10 employees to cut employees. To keep costs under control, Amsel says he has already been forced to eliminate four jobs.
Restaurants are being hit hard. As the wage law is phased in, the tip-based approach for wait staff is largely being replaced by a $10-per-hour salary, plus a guaranteed $5-an-hour in tips the employer must pay if tips don’t amount to that much. This will likely change how dining establishments operate. Expect to see more at-table computerized ordering and fewer wait staff. Such automation is fine when restaurants choose to do it, but many restaurants will basically be forced into making such changes because they won’t be able to afford the labor.
Some local lawmakers have started to catch on. Although Washington, D.C., lawmakers have traditionally supported minimum wage laws, the city council voted to overturn a voter initiative that increases the minimum wage to $15 in the nation’s capital. Apparently, they don’t want to see Washington’s economic health go down the drain.
It’s not surprising that businesses and individuals are fleeing places such as New York state in droves, moving to more affordable, less-regulated, and lower-taxed states such as Texas. Even Washington’s largely pro-regulation city council seems to get it. It’s time for lawmakers around the nation to wake up before it’s too late for their small businesses and people who work for them.
Originally published at the Washington Examiner.