A Big Mac attack can now be satisfied with nearly no human contact, all from the comfort of the car.
The largest fast food chain in the country, McDonald’s, is testing a highly automated location with no indoor seating just outside Fort Worth. It is the only location like this in the country.
“The features – inside and outside – are geared toward customers who are planning to dine at home or on the go,” a McDonald’s press statement explained of the design.
The restaurant at 8540 West Freeway in White Settlement has multiple modes for ordering and receiving the fare. A dedicated drive-through lane allows for ordering ahead and picking up burgers and drinks from a conveyor belt. An employee takes the order number and is available to answer questions throughout the process, a company spokesperson said.
Order kiosks inside the location accept cash or credit, parking is available for curbside pick-up, and food couriers like GrubHub drivers have a dedicated area to streamline their interaction as well.
According to the spokesperson for McDonald’s, customers appreciate the new technology and ease of ordering associated with the “Order Ahead Lane.” He also claimed delivery drivers appreciate the simplicity of an area just for them to pick up customers’ orders.
Franchisee Keith Vanecek and Manager Rosemin Jussab are two of the people behind the operation of the new test restaurant.
Jussab, who has worked for McDonald’s for 20 years since her college days, enjoys the challenge and the technology that comes along with it. “The focus on technology within this restaurant is amazing and shows the emphasis we put on innovation; it’s exciting to be a part of,” she said in a press release.
For those concerned that an automated restaurant like this one will eliminate entry-level jobs, McDonald’s says it anticipates this restaurant format will require a comparable number of team members to a traditional store. Employees are required for interaction between customers and the restaurant team when picking up orders, assisting with using the self-order kiosks, and delivering curbside orders.
The recent coronavirus pandemic likely contributed to the speed of automation we are seeing in industries like fast food restaurants today, economist Vance Ginn told The Texan.
Ginn said the pandemic has led to difficulty finding workers, inflation has raised the wages demanded by entry-level workers, and high turnover rates have increased costs for training. Combined, these factors have contributed to an acceleration in the implementation of technology like the new test location of McDonald’s.
“Businesses have to make a profit or they don’t stay in business,” Ginn noted.
“Short-term [the automation] may have some costs, but other jobs will come around,” Ginn said. He suggested a shift to other jobs will take place as has always happened when technology advances and crowds out another industry.
“When the Model T was created, people cried about the end of horses and buggies, but we wouldn’t want to go back,” he added.
Additionally, entry level workers may be incentivized to get training in higher technical skills to participate in the workforce.
McDonald’s is aiming to serve its customers more satisfactorily and seamlessly through the use of automation at its new test location. The chain has struggled with customer satisfaction, falling at the bottom of the list 15 points behind Chick-Fil-A, a perennial leader with employees declaring their “pleasure” in serving customers.
Whether the newest test location will help McDonald’s move up in the satisfaction rankings, and whether it is adopted elsewhere, remains to be seen.
“That’s the beauty of the free market,” Ginn commented. “Businesses can try new things and see if they are profitable. It allows for experimentation.”
Originally published at The Texan.
Twenty-one states rung in the New Year by raising their minimum wage, to as high as $15 per hour in California, thinking it will benefit employees in those states. But the minimum wage does the opposite of helping workers, especially for those who need it. Fortunately, 20 states, including Texas, haven’t raised theirs in more than a decade.
Proponents of the minimum wage claim the law helps hard-working people with a “living wage.” But that’s not what the policy does. Economist Art Laffer put it succinctly: “A high minimum wage is extremely damaging to the poor, the minorities, the disenfranchised, and the young.”
As with most policies, the effects of a policy matter more than the best intentions of those who champion the policy’s cause.
The minimum wage reduces jobs and increases poverty. People even move from states with a high minimum wage to states with a lower minimum wage because there are more jobs and more opportunity. That is especially true for young people and others without much experience, on-the-job training, or education.
If you want to know which policies people prefer, see how they vote with their feet. The latest Census Bureau data shows that more than 1,000 people each day moved to Texas in 2021. But the Lone Star State is not alone in attracting new businesses, jobs, and people. Other states with low minimum wages attracted more people than average while states with high minimum wages—California, New York, Illinois—are hemorrhaging people at an alarming rate.
The real minimum wage for employees is always $0. If an employee adds only $8 of value per hour to a business, but the minimum wage is $15, then that person will be unemployed, hence a $0 wage.
As many states have arbitrarily pushed their minimum wages higher for political reasons, low-wage workers are slowly being replaced by machines. This is the classic labor-capital tradeoff forced by government coercion through a labor market regulation rather than through voluntary negotiations by people.
For example, some fast-food restaurants are replacing cashiers with kiosks, which tends to reduce hiring of lower-paid workers while oftentimes increasing higher-paid workers who create, build, and maintain the kiosks. This process increases income inequality, which is something proponents often find concerning.
Although it is never a good idea to raise the minimum wage, now would be a particularly bad time.
Businesses are already facing record-high cost increases from price inflation and a government-mandated minimum wage increase would just be adding insult to injury. The latest data show there are 10.6 million unfilled jobs in the U.S. which is far exceeds the 6.3 million unemployed people. While this precarious labor market situation has many causes, a high minimum wage is certainly not helping.
By eliminating some low-skill jobs, the minimum wage reduces the opportunity for many people to climb the ladder of success. Without that entry-level job, many people never escape the cycle of government dependency and poverty, never gain skills, and never become eligible for higher-skill jobs. That creates a mismatch in the labor market for better jobs.
Some of the compensation people receive in their first job isn’t even monetary; it’s learning skills, dignity, and purpose. A first job teaches a person how to work hard, the value of showing up on time, and how to work with others.
Low-wage jobs are not designed to support a family; they’re an important first step on the ladder of success to better jobs with higher pay. Governments raising the minimum wage eliminates many of these jobs, and that cuts out the first rung on the ladder for those who are most vulnerable.
Opportunity and work provide the best path to a successful, self-sufficient, rewarding life. Eliminating this pathway segregates those individuals and confines them to dependency on government.
This disproportionately affects those groups (young, part-time workers, unmarried, and without a high school diploma) who rely on a low-wage first job to give them a hand up out of poverty.
If we truly want a level playing field for all employees and equal opportunity for all, the last thing we want is a higher government-mandated minimum wage.
The COVID-19 pandemic has changed our routines, but it doesn’t change the laws of economics. Yet it seems government is in the business of doing something when it really should do nothing, such as the recent proposals by President Biden and Congress to spend more and raise the federal minimum wage in the name of pandemic relief.
These actions would not only make a bad economic situation worse, especially for the ones the policies are intended to help, but they would destroy the unity that the president says he wants.
We’ve already seen the devastation that government action can cause during the pandemic, as the broad U6 unemployment rate remains at an elevated 11.1% and almost 800,000 people are filing initial jobless claims every week. The government shutdowns are an unfolding tragedy, and we won’t know their full extent for years to come.
But, as usual, there’s another attempt to put a patch on the American economy with an unnecessary, poorly crafted monstrosity of a $1.9 trillion COVID-19 relief package, which includes raising the federal minimum wage from $7.25 to $15 per hour by June 2025.
This boondoggle sends taxpayer money to people through checks when real personal income reached a record high in 2020. Its higher unemployment payments will distort incentives to work. And it will bail out profligate state and local governments when they’ve already received nearly three times more in taxpayer funds than their estimated losses.
Collectively, this package could delay the needed reopening of our economy, the only real path to regain Americans’ taken prosperity.
The focus of a package—if it must be done—should be to get the vaccines out as quickly as possible to open America now so that people can regain their prosperity they had before the pandemic. Better yet, a pro-growth approach of spending restraint, tax relief, and deregulation would be a better federal response.
In fact, the latter two measures (tax relief and deregulation) were practiced by the Trump administration and it contributed to records of the highest real median household income and lowest poverty rate in 2019. And while President Trump’s budgets found more fiscal savings than any other president, Congress continued to spend excessively—thereby bankrupting us and our country in the process.
But what’s getting a lot of media attention recently without much consideration of its cost is the Raise the Wage Act that the Democrats in Congress are trying to push through. This arbitrary hike of the federal minimum wage would be a mistake as it would separate us in terms of economic status and further divide us as a nation. That’s not what I would consider as “unity.”
According to a 2019 Pew Research poll, about two-thirds of Americans supported increasing the minimum wage to $15. But at what cost, given that nothing is free?
For example, the Congressional Budget Office recently reported that passing the Raise the Wage Act could mean as many as 2.7 million workers lose their job and earn the real minimum wage of $0. This would also come at the cost of $54 billion more to the national debt, further bankrupting us. And while the number of people lifted up from poverty could be 900,000, many of them will face higher prices, higher taxes, and higher interest rates making it harder for even those lucky enough to not lose their jobs to make ends meet.
But this analysis misses two key points that should not be overlooked: 58.5% of Americans earning the minimum wage are between 16 to 24 years old, and costs of living vary greatly across states, with California being 50% more expensive than Texas.
This means that those who will be hit hardest by raising the minimum wage are those just trying to get their foot on the bottom rung of the economic ladder, and typically have other sources of income. In fact, raising the minimum wage can benefit high-wage, highly skilled people at the expense of low-wage, low-skill people as employers move from labor to capital in their operations. This actually increases income inequality.
And states that have done a good job in keeping the cost of living low, like Texas (due to more pro-growth policies resulting in increased economic freedom) are hit hardest compared with those that don’t, like California. We should let federalism’s system of “laboratories of democracy” continue to prove that people vote with their feet, as the number of Californians moving to Texas increased by 36% in 2018.
America may still be suffering through the chaos of COVID-19, but that doesn’t mean we need more of it. President Biden should give doing nothing a chance, especially his policies that will bankrupt the country and force increased unemployment.
Words mean things—and that’s just one of the flaws in Pedro L. Gonzalez’s latest piece in Newsweek, titled “The Conservative Case for a $15 Minimum Wage.”
There’s nothing conservative about the class envy Gonzalez leans so heavily upon. Nor is there anything conservative about his reliance on the left-leaning, union-friendly Economic Policy Institute to downplay the negative effects of an artificial increase in the minimum wage. Finally, it’s simply bizarre to claim that using the power of government to force specific economic outcomes is in any way “conservative.”
Let’s start with the clear (and undisputed) facts. Raising the minimum wage—especially now, in the midst of a government-induced economic slowdown—would devastate small businesses. It would hurt those it is intended to help the most, by eliminating jobs, reducing the hours of those who still have them, and by cutting off the lowest rungs of the ladder to success. (When I say “undisputed,” I mean it—the real question for most economists is whether the tradeoffs are worth it.)
We’ve already seen the devastation that government action can cause during the pandemic, as the broad U6 unemployment rate remains at an elevated 11.1% and almost 800,000 people are filing initial jobless claims every week.
Yet Gonzalez brushes these economic realities aside and begins with exactly the kind of argument you might expect from U.S. Sen. Bernie Sanders—a Democratic Socialist, and the furthest thing from a conservative you’ll find in the Senate. It’s class envy—the “CEOs make more than you” argument.
“This is,” he writes, “… the consequence of policies that intentionally greased the wheels of greed.”
It’s workers versus the bosses in Gonzalez’s mind.
“Lawmakers and lobbyists have deliberately guided the ‘Invisible Hand’ to pad the pockets of the very few at the expense of the many,” he writes. “The former receive acclaim as captains of industry while the latter subsidize their bailouts and are told to bootstrap themselves.”
He’s not completely wrong there; but that’s not an argument against free markets. Rather, it’s a damning indictment of the kind of government intervention Gonzalez is calling for. The bailouts are the problem, not the bootstraps.
And that brings us to the second point. For EPI—and by extension, for Gonzalez—the rigged economy shouldn’t be fixed, just re-rigged, with the labor movement as the primary beneficiary. According to its website, EPI believes “A strong, effective labor movement is essential for democracy and to ensure an equitable sharing of income and wealth,” and “Economic policy should focus on improving conditions for working people.”
Yet the tired labor vs. management dichotomy misses what is truly the heart and soul of the U.S. economy—small businesses. Tens of millions of Americans are both, workers and managers. They don’t merely own the means of production, they are the means of production.
Yet millions of those small businesses--nearly a third, in fact—have either closed because of the government-ordered shutdowns or fear they will soon be forced to. A minimum wage increase, advocated by Gonzalez and EPI, would shutter many, many more of them.
This is quite literally government picking winners and losers—something incompatible with conservatism. So is the one-size-fits-all, top-down approach. And that’s my third point: This is in no way a conservative policy position.
The fact is that one size never fits all. That’s especially true with the minimum wage. We know that 58.5% of Americans earning the minimum wage are between 16 to 24 years old. And we know that costs of living vary greatly across states, with California being 50% more expensive than Texas.
There simply is no “conservative case” for a minimum wage increase. Yet a closer look at American Greatness, the website where Pedro Gonzalez serves as assistant editor, seems to indicate that it’s less interested in conservative ideas than in redefining the word.
Look, we know what works. The Trump economy focused on freeing Americans to pursue their own dreams. In February 2020—before the pandemic and the government shutdowns—the U.S. unemployment rate was 3.5% (well below what most economists consider full employment). The rate for the nation in January 2021 was 6.3% after many have dropped out of the labor force.
What we need is a clear path to economic recovery—a recovery based on letting people prosper. And that’s what we at TPPF have outlined in our Responsible Recovery Agenda that’s meant for Texas but is applicable to other states and even D.C. It’s conservative—in the real meaning of the word.
In this Let People Prosper episode, James Quintero, Dr. Derek Cohen, and I discuss the following:
In this Current Events Friday episode of the Let People Prosper show, James Quintero, Dr. Derek Cohen, and I discuss:
Thanks for watching and be sure to subscribe. #letpeopleprosper
In this Let People Prosper episode, let's discuss how the best path to prosperity is capitalism and that starts with a job. The more ways that we can free up the labor market from government barriers to opportunity, such as the minimum wage and occupational licensing, the more prosperity we can all enjoy.
My recent op-ed in the Investor's Business Daily titled "Amazon's Minimum Wage Revelation: It's About Competition, Not Workers" notes the opportunity costs associated with a government-mandated minimum wage compared with a private market decision: "Just as the company's management had the freedom to consider the firm's profitability and outlook in deciding whether to offer the higher wage, other private employers should have the same freedom. Amazon apparently thinks they shouldn't, hence the lobbying for a national mandate. Those lobbying efforts could end up doing even more harm."
My recent paper with Dr. Edward Timmons titled "Occupational Licensing: Keeping People Poor" notes the huge cost that many licenses have on people whether they be workers, consumers, or employers. We highlighted this in a recent op-ed: "Between 1993 and 2012, Texas added licensing requirements for 22 low-income occupations. Data from the Texas Department of Licensing and Regulation indicate a 460 percent increase in the number of licenses issued by the department, far surpassing the state’s population growth of 37.5 percent in that period. By making it harder for aspiring workers in Texas to enter the job market, licenses artificially inflate wages — and this means higher prices for the services provided. National estimates suggest that licensing inflates wages of professionals by about 15 percent. And this means consumers pay higher prices. In addition, individuals looking to enter a new field may be prevented from achieving their dreams."
For the sake of human flourishing, we should be doing all we can to reduce government barriers to prosperity that are socialist programs like the minimum wage (price of labor control) and occupational licensing (quantity of labor control).
As many across the country argue for an increased federal minimum wage, such as the Fight for $15, Amazon announced on October 2 that they were raising their base pay to $15 per hour. While altering their own business costs is one thing, Amazon also plans to join others in lobbying Congress to mandate a higher minimum wage for Americans.
Amazon’s move to raise its base pay isn’t surprising; the company recently passed the trillion dollar value threshold, second to only Apple. While Amazon may be applauded for raising workers’ pay, its lobbying efforts aren’t as worthy.
Just as the company’s management had the freedom to consider the firm’s profitability and outlook in deciding whether to offer the higher wage, other private employers should have the same freedom. Amazon apparently thinks they shouldn’t, hence the lobbying for a national mandate.
Those lobbying efforts could end up doing even more harm.
Despite the commonly held perception that minimum wage laws reduce income inequality and provide the poor with a better life, the real effects are the opposite.
FEWER JOBS, FEWER HOURS
Minimum wage laws have proven detrimental by reducing job creation and the total hours worked for low-skilled workers, who are primarily paid the minimum wage and have less than a high school diploma or little work experience. And the laws raise prices for everyone — thus widening income inequality.
A labor market without government impediments functions like any other market. Employers and workers negotiate a wage, benefits, hours worked, and other measures of compensation until there’s mutual benefit. If they don’t agree, the worker isn’t hired. This is the same kind of mutually beneficial exchange that occurs when you go to the farmer’s market or department store, and it shouldn’t be any different in the labor market.
When this unhampered negotiation is restricted by government barriers such as an arbitrary minimum wage law, there is a misallocation of resources that hurts employers and workers.
For example, no matter what the minimum wage is, $15 or $150, the market will correct itself through higher prices and fewer jobs. In other words, the poor will stay poor, as they see their hard-earned dollars able to buy less and find fewer job opportunities.
VULNERABLE LOW-SKILL WORKERS
Lower-skilled workers are especially vulnerable to the proven job losses caused by federal minimum wage increases because employers who can’t afford the increases in the cost of production simply close up shop, reduce employee hours, or even switch to automation.
A recent study on the effects of minimum wage raises in California using data from 1990 to 2016 showed that a 10% increase in the minimum wage could contribute to a 3.4% reduction in employment. Key industries hit hardest are restaurants and retail stores that typically operate on razor-thin profit margins and often hire low-skilled workers and those new to the workforce.
And minimum wage laws actually make income inequality worse.
As noted from research by the American Action Forum, a large share of the added wage value from minimum wage hikes goes to workers already paid well.
For example, McDonald’s has been replacing cashiers with kiosks in many of their locations nationwide. The kiosks are designed, built, and maintained by high-skilled, high-wage workers while cashiers are typically low-skilled, low-wage workers.
In other words, jobs are created for computer programmers and robotics experts, while jobs are destroyed for those with fewer skills and less workplace experience. The result is an increase in income inequality.
MINIMUM WAGE MISTAKE
So why would Amazon lobby for a policy that has such broad negative effects on the economy?
Maybe because Amazon is a mammoth corporation that has seen tremendous success in recent years. A higher federal minimum wage would probably not hurt its bottom line much.
But Amazon’s competitors might not be so lucky, particularly if they are small businesses just starting out. A higher federal minimum wage could create artificial barriers of entry that would make it easier for Amazon to stay at the top while making it harder for its competitors to succeed.
When it comes to wages, what works for one employer doesn’t necessarily work for another.
We can applaud Amazon for giving its own workers raises; that doesn’t mean Amazon should be lobbying to demand raises for everyone else’s workers, too.
By strengthening the employee-employer relationship through economic freedom — not minimum wage laws — to let people freely negotiate, employees and employers can prosper.
In this episode, I discuss today's decision by the San Antonio City Council with a 9-2 vote to pass a city ordinance mandating private businesses provide paid sick leave of 64 hours for those with more than 15 employees and of 48 hours for those with 15 or fewer employees.
As I noted in a previous blog post, this sort of forced activity by government is bad for employers (raises costs), bad for employees (reduces negotiating power), bad for consumers (increases prices), and bad for the Texas economy (less economic activity).
Instead, San Antonio and Austin, which passed this ordinance earlier this year, should find ways to provide a pro-growth economic framework to let people prosper instead of making people poor while likely violating state law (Texas Minimum Wage Act).
Service industry workers — wait staff, bartenders and the like — are experts in free-market economics. They enjoy immediate and tangible reward for their hard work in the form of tips, and the best servers can make hundreds of dollars per shift through hard work, positivity and attentiveness.
When they aren’t feeling it, the effects are equally tangible — in the form of less pay at the end of a shift. There are other variables, of course, but tipped service workers enjoy something that’s increasingly rare in our salary and set-wage world: They have a real degree of control over how much they earn daily.
So it’s no surprise that many oppose the District’s minimum wage hike for tipped workers. When Initiative 77 was presented to D.C. voters in June, it was sold as a progressive reform for an industry with struggling workers. The measure, approved 55 percent to 45 percent , will raise the minimum wage for tipped staff from the current $3.33 per hour to $4.50 in July and eventually to D.C.’s standard $15 per hour by 2025.
Yet the workers themselves opposed it. They formed “Save Our Tips” groups on social media, and they lobbied hard against it. Why? Because they knew its effect wouldn’t be to set a lower limit on how much they could earn; instead, it would set an upper limit.
It’s simple economics. Restaurant owners will probably compensate for mandated higher server wages by raising food prices. The predictable effect is fewer customers. And the remaining customers will be less inclined to tip. Proponents of Initiative 77 said customers would be free to tip, but the legislation itself makes no mention of that. Tipping culture could die, leaving the ambitious wait staff or bartenders scraping by on what government — not their customers — says they’re worth.
And it’s not just the workers at risk. The bustling D.C. food scene will drastically change.
Food writer Todd Kliman (formerly of the Washingtonian ) knows what will happen if the D.C. Council doesn’t repeal the measure.
“Get ready for it, DC,” he tweeted. “Those cocktails that’re overpriced [right now] at $14? Soon enough they’ll be going for $18. And you’ll be lucky to find apps below $16 at anywhere decent. Entrees? $36-$40, easy. Initiative 77 is gonna make [restaurants] even more a place for those with $$$.”
And the small, family-owned restaurants and neighborhood bars will be hit the hardest. Their margins are typically small, and with rising rents, additional costs will force more of them to close or relocate outside the District.
But really, this is a battle over minimum wages.
Supporters of Initiative 77, “Fight for $15 ” and similar measures call for a “living wage,” but the truth is that despite their good intentions, minimum-wage hikes hurt the very people they’re attempting to help.
There’s a rare near-consensus among economists that price controls lead to poor outcomes in the marketplace. The classic example is the price controls on gasoline the federal government put in place in the 1970s. The outcome: long lines and significant shortages.
This is also true of restaurants. When government demands that employers pay more for labor, then employers can afford less of it.
On a not-unrelated note, the first hamburger-making robot has gone online in a San Francisco restaurant. Such technology shows that when government steps in and forces up wages, employers have ways to work around them.
To put it simply, no matter what the minimum wage is in law, the actual minimum wage is always zero. An unemployed person who lost his job or can’t find one because of high labor costs earns nothing.
Servers and tipped staff understand this simple economic concept, and that’s why they’re so vehemently against Initiative 77. The D.C. Council has already taken steps to repeal the measure, and Congress is stepping in.
That’s good — it’s good for the economy, it’s good for the industry, and it’s good for the workers who will again have control over their own prosperity.
The Military Order of the World Wars approached the Texas Public Policy Foundation in 2014 about having someone present on the benefits of a free enterprise system at their Southwest Youth Leadership Conference aboard the U.S.S. Lexington in Corpus Christi. I have presented to many top-notch, high school students from across Texas each summer since then to discuss the importance of the free enterprise system, especially how it relates to the labor market with the use of a minimum wage game (spreadsheet for the game here).
Watch the video above of the presentation in 2016, which provides further explanation of the game and shows the wage negotiations between students.
The game has been expanded upon over time since first created with Dr. Mark Frank while we both taught at Sam Houston State University. The game is composed of multiple sessions where some of the students are employers and others are workers.
Students learn how a labor market works through negotiations between employers and workers in a free enterprise system and in a system with a government-mandated minimum wage. The game shows that although there’s a higher average wage in a system with a minimum wage, there is also higher unemployment, especially for low-skilled workers that the government is trying to help. Students learn how workers are best able to demand a higher wage with less unemployment by increasing their productivity through education, technical skills, and on-the-job training, which access can be limited when there is a minimum wage.
Ultimately, the game helps students to start thinking like an economist when considering how the free enterprise system works and how government intervention will distort those outcomes. It’s fantastic to see the light bulbs start turning on throughout the game as students realize the costs of a minimum wage.
For the last three years, I've worked with SMU's O’Neil Center for Global Markets and Freedom to present my unit in their series “Teaching Free Enterprise in Texas” that teaches high school teachers in Texas about key economic principles. This series of publications are compliant with Texas' TEKS (state standards) and include the benefits of the free enterprise system with regards to international trade, fiscal policy, and other important areas. My unit on “Labor Market Economics” includes the minimum wage game that I've presented to hundreds of public school teachers statewide.
The best path to prosperity is through free enterprise, individual liberty, and personal responsibility—the pillars of improving everyone’s well-being that we promote at the Texas Public Policy Foundation. Unfortunately, these are concepts that many students never learn. With the Foundation’s outreach to high school students on these important principles, there’s a better chance that many will think like an economist and help provide a brighter future for all.
I talk about the increased trade uncertainty by the Trump administration influencing the stock market today, TPPF's daily newsletter called The Cannon (sign up here), and the vastly different costs of living in each state leading to different state poverty rates and the question of whether there should be a federal minimum wage (Answer: NO).
Stay tuned for the next episode!
In this episode, I talk about the concept of opportunity costs and how we must sacrifice things to satisfy our desires. We work to consume, but an artificial minimum wage set by government distorts the labor market and hurts low-skilled workers the most.
Find the article on DC here and the average tipped wages from BLS here.
I had the opportunity today to testify before the Texas House Business & Industry Committee against raising the state's minimum wage. There were 9 bills filed to raise the government-mandated minimum wage and I testified against them all. As outlined in the following resources and research links in many of them, it is clear that the minimum wage hurts most those its intended to help. The Texas Legislature would be wise to not raise the minimum wage but rather focus on strengthening the Texas model of limited government and free markets.
Here is my oral testimony at time 01:26:30.
Here is my written testimony and KVUE interview
Here are recent interviews: KXAN, EverythingLubbock
Here is a video of my minimum wage game for students.
Here are previous op-eds in the Statesman, Houston Chronicle, Tyler Morning Telegraph, Morning Consult, Fort Worth Star-Telegram, The Daily Signal
Here is a blog post: Just Say No to a Higher Minimum Wage
Here is a list of more than 500 economists who signed to not raise federal minimum wage.
This commentary originally appeared in the Fort Worth Star-Telegram on December 2, 2016.
As the start of the 2017 Texas Legislature on Jan. 10 quickly approaches, legislators have already pre-filed bills intended to improve your livelihood.
While some bills may accomplish this goal, others shouldn’t see the light of day. One of those is raising the minimum wage.
For example, House Bill 285 aims to alter Texas’ Labor Code section 62.051, which states, “an employer shall pay to each employee the federal minimum wage.”
Currently, Texas is one of 21 states that have a minimum wage at or below the federal minimum wage of $7.25 per hour.
This bill would raise the state’s minimum wage to $15 per hour or subvert Texans’ wage control to Congress if the federal mandate exceeds that level.
The bill may aim to help people in poorer districts, like District 104 in and around Dallas, where more people live in poverty than the state’s average. However, basic economics explains that a $15 minimum wage would hurt those it most intends to help.
There’s a common misconception that the labor market is different from other markets where individuals negotiate prices.
A minimum wage is a government-mandated wage control that centralizes power out of the hands of workers and employers.
There’s a rare consensus among economists that binding price controls lead to bad outcomes, such as long gas lines in the 1970s, but politics gets in the way of seeing the fallacy of a minimum wage control.
As with other markets, the labor demand curve is downward sloping — employers hire fewer workers as wages go up.
Setting a minimum wage floor above the market wage results in a bad outcome called unemployment.
It also pushes currently unemployed workers who would take a job less than the minimum wage into long bouts of unemployment and dependency on family or taxpayers.
In addition, the minimum wage puts more power in the hands of more highly skilled workers who will build and maintain labor-saving products, leading to an upward redistribution of income.
Research shows that Texas could lose nearly 1 million full-time jobs if the minimum wage was raised to $15 — more than any other state.
The state cannot afford this massive unemployment — nor can the country, as Texas has been the job creation engine for the last decade.
If employers aren’t able to quickly fire low-skilled workers, another option to avoid profit losses or shutting down is to raise prices.
As prices rise, the prevailing higher cost of living would leave the less than 5 percent of Texans who earn at or below the minimum wage no better off, highlighting the arbitrary nature of a government-mandated wage.
Instead of resorting to the misdirected policy of a minimum wage that doesn’t raise standards of living in Texas, the Legislature should focus on solving the underlying causes of poverty.
A good place to start would be with education savings accounts.
These would allow parents the opportunity to determine the type of schooling that best meets their child’s needs, whether that’s public, private, home school or some combination.
By increasing human capital, future workers can demand a higher pay.
For those already in the labor market, holding government spending increases below population growth plus inflation and putting the business franchise tax on a path to elimination would go a long way to increasing well-paying job opportunities statewide.
Raising the minimum wage may seem helpful on its surface, but a deeper look reveals that government control of wages hurts those it most intends to help.
Instead, legislators this session should support more prosperity achieved in Texas by further freeing markets from government intervention so limited taxpayer dollars fund core government provisions.
Vance Ginn is an economist and Elliott Raia is a research associate in the Center for Fiscal Policy at the Texas Public Policy Foundation in Austin.
Vance Ginn, Ph.D.