Well, Now I’ll Start Leaving Smaller Tips
The Missouri House of Representatives rejected a bill yesterday which would have cut the minimum wage rate for tipped restaurant employees from its current rate of $3.32 to $2.13, the same as the federal minimum wage.
When considering legislation, lawmakers should first address the following two questions: 1) Does the legislature even have the power to pass this law; and, 2) Will the law have the effect that it’s intended to have?
I would argue that most politicians don’t even consider the first question. But for the sake of argument, let’s say that they do and consider the second question. Will the higher minimum wage help or hurt restaurant employees?
The Wall Street Journal happened to profile the struggling restaurant industry the other day. Here’s what they found (emphasis added):
Adding to the pressure is a big jump in the minimum wage starting this summer, which will boost wages by 12% in some states.
That’s sent the industry into its worst slump in decades. Many chains have scaled back expansion plans or cut costs by skimping on things like extra sauce and free sour cream. Some are shuttering sites and laying off workers.
It’s tough to make the minimum wage when you don’t have a job in the first place. Studies have repeatedly found that minimum wage laws are harmful to employers and employees alike. And those that are hit the hardest are generally the least-skilled and least able to afford losing their jobs, rather than the teenager in suburbia saving up for a car. And let us also not forget that Missouri has one of the highest minimum wage rates among its state neighbors, making labor much more expensive in Missouri than, say, Tennessee.
Like everybody else, I wish that the government could be Santa Claus and magically give things out for free. But, unfortunately, they can’t be which means that every piece of legislation has unintended consequences. In this case, it’s increased costs to a struggling industry amid a slowing economy. Are we helping or hurting restaurant employees?