Download the full policy brief here.

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Similar to Missouri’s potential $15.00 minimum wage, Seattle’s minimum wage ordinance passed in 2014 phased in an increasing minimum wage in the City of Seattle from the state’s $9.47 minimum to $11 in 2014, $13 in 2016, and $15 in 2017. A 2017 study at the University of Washington found that the increase to $15 an hour resulted in low-skilled workers experiencing a reduction in hours worked or even job loss. This decrease in hours worked for low-skilled workers resulted in “a net loss of $74 per month.” A pay cut of $74 per month can have a significant impact on low-income workers. The study found that employers opted to replace low-skilled workers with higher-skilled workers who could perform the job more effectively and therefore warrant a wage equivalent to the new minimum wage.

Seattle’s experiences are just one example of how a minimum wage increase negatively affects low-income workers. California recently increased its minimum wage to $20 for fast-food workers, resulting in many workers suffering from a loss of income. Mark Harmsworth, director of the Small Business Center at the Washington Policy Center, said:

Sometimes, instead of a salary bump, many workers instead find their work hours cut or their jobs eliminated completely. For some employees, if they fall below a minimum hour threshold required for benefits, they lose benefits too.

Increasing the minimum wage is a misguided way to try and help workers. If policymakers and voters want to assist low-income workers, then increasing the Earned Income Tax Credit would be a better approach.

The post A Closer Look at the Effects of a $15 Minimum Wage for Missouri appeared first on Show-Me Institute.

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They discuss the recent GameStop stock controversy, the idea of a $15 federal minimum wage and more.

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The authors also project that 11,000 jobs would be lost as a consequence of the increased price of labor. The essay includes demographic breakdowns (by age, sex, race, and education/income levels) of those whose wages would go up and those who would lose their jobs.

The post The Potential Effect of a $12 Minimum Wage in Missouri appeared first on Show-Me Institute.

While the situation for single parents working minimum wage jobs is undoubtedly difficult, increasing the minimum wage can harm people in that position, as well as those struggling to hold down a job. After Seattle increased its minimum wage, low-wage workers had their hours cut, and the number of minimum wage jobs decreased. In fact, it is the people without steady employment who are much more likely to be in poverty and who are hurt the most by the unintended consequences of a higher minimum wage.

In a working paper for the American Enterprise Institute, Angela Rachidi uses data from the Survey of Income and Program Participation (SIPP) to show that most families who have one adult consistently working are not in poverty—and if they are in poverty, it is likely to be for short periods of time. SIPP data give us unique insights because they follow the same families for 36 months and track their poverty and job status during that time. When measuring the federal poverty rate, on the other hand, the Census Bureau merely asks families if they have been in poverty at all in the past 12 months but nothing else about their situation.

One chart (below) from the paper sheds light on the economic situation of American families and how often they were in poverty or unemployed. The far-left bar represents families where at least one person held a job for the entire 36-month survey period. In this group, 78 percent were not poor at any time, 17.5 percent were poor for 1 to 18 months, 2 percent were poor for 19 to 27 months, and 2.6 percent were poor more than 27 out of the 36 months they were surveyed.

Intermittent = 1 to 18 months of the three-year period. Recurrent = 19 to 27 months of the three-year period. Persistent = more than 27 months of the three-year period.

Source: Rachidi, Angela; American Enterprise Institute. Persistence of Poverty and Joblessness in US Households. AEI Economics Working Paper. July 2018. Figure 5 (Author’s calculations using the Survey of Income and Program Participation, 2008 Panel, Years 2009–11, Waves 2–11).

Those who experienced intermittent and recurrent joblessness (two middle bars) were much more likely to be in poverty at some point during the survey period. These people are having difficulty getting hired at the current minimum wage. For those who are persistently jobless and do not have income from retirement or disability insurance to keep them out of poverty, the barriers to entering the job market are also high. Mandating that employers pay even more for their labor will only take away employment opportunities and make it even harder for them to get a foot in the door toward more stable employment.

A better solution would to be implement an earned income tax credit (EITC) here in Missouri so that those who are working can hold on to more of their paycheck. Instead of making low-wage workers pay a state income tax, a non-refundable EITC could reduce or even zero-out their state income tax bill and increase their take-home pay.

It’s understandable to want to do something for people who work hard but still can’t escape poverty. But just because a policy is intended to fix a problem doesn’t mean that it will actually work. Missourians risk creating a worse system with a higher minimum wage that benefits the few who consistently work while harming many more who face low earnings due to frequent unemployment or underemployment.

The post Should Missouri Increase the Minimum Wage to Help the Working Poor? appeared first on Show-Me Institute.

 Let’s do just what Rep. Ellington has suggested. Let’s look at the evidence from these places. Ellington is correct in saying there hasn’t been an exodus of “corporations or companies,” but there have been some negative outcomes.

 Washington D.C.

 D.C. passed the “Fair Shot Minimum Wage Amendment Act of 2016.” The amendment increases the district’s minimum wage to $15 by 2020 and then sets annual increases that are pegged to changes in the Consumer Price Index. Earlier this year, the Office of the Chief Financial Officer for the D.C. mayor’s office released a study that estimated the impact this will have on the city, and the findings aren’t anything to be bullish about.

 As one would expect, wages will increase. By 2021, the study’s authors estimate that “the average resident will gain roughly $5,100 more (20 percent higher) in wages as of 2021, but approximately 2 percent of impacted residents will experience job loss; this job loss estimate increases to about 3.4 percent by 2026.” Additionally, the study found that “average citywide prices will increase by roughly 0.2 percent and businesses will experience a 2.3 percent average reduction in profits as a result of this policy.”

 Seattle

The Seattle Minimum Wage Ordinance went into effect in 2015. From 2015 to 2016, the minimum wage increased from $9.47 to $13. This is roughly a 37 percent increase in a short amount of time. The ordinance has different provisions for different types of employers, but will gradually increase the minimum wage to $15. Earlier this year, a team of researchers from the University of Washington released a paper on the impact thus far. When the minimum wage went up, employers did what we would expect them to do; they reduced the hours of employees. The researchers suggest the increased minimum wage resulted in a reduction of 3.5 million working hours per calendar quarter. Low-wage jobs (jobs paying under $19 per hour) went down 6.8 percent.

 As economist David Neumark noted in his 2012 policy study for the Show-Me Institute, “Should Missouri Raise its Minimum Wage?,” there are clear tradeoffs with this policy proposal. Raising the minimum wage increases the wages for a select portion of the population: those earning roughly minimum wage who manage to not have their hours cut (or their jobs eliminated altogether). This increase comes at the expense of the low-skilled workers who are not able to enter the labor market or lose their jobs. This issue is particularly concerning in our border cities, where higher pay may attract people from neighboring suburbs in other states. As these individuals enter the job market, they may take jobs away from low-skill Missourians living in Saint Louis and Kansas City.

 The real question for Missouri lawmakers is: Do you want to increase unemployment for some Missourians to provide others with higher wages? 

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Moving from a $7.65 minimum wage to a $15 wage by 2020 is a huge increase, and something that is not even supported by all the usual liberal pundits. Matt Yglesias wrote in Vox of the effort in St. Louis,

In St. Louis, people are much more likely to adjust to a higher cost of employing people by employing fewer people. The most relevant precedent for a big hike in a relatively poor jurisdiction may be Puerto Rico, where an effort to match the US federal minimum wage led to a rise in unemployment and increased migration to the mainland United States. St. Louis is richer than Puerto Rico, but moving a person or a job across the St. Louis city line into the suburbs is a lot easier than migrating from Puerto Rico to the US mainland.

Here is what will happen in Kansas City if the wage is increased: Employers who rely on minimum wage employees will seek to avoid the higher labor costs by hiring fewer people and investing in technology. We’re already seeing the latter in fast food restaurants that rely on kiosks for ordering. With fewer jobs available, the competition for them will grow, and those with the fewest job skills—who are also those with the greatest need for that first job—will be harmed the most. There just won’t be enough work for them. This is true is most places that require an increase in wages.

The second item is particular to Kansas City and will further diminish job opportunities for poor and low-skill workers. Middle class kids from Overland Park, where the minimum wage is $7.25, will suddenly have an incentive to cross State Line Road to earn $12, $13, and perhaps even $15 an hour. (Remember, 44.6% of those earning minimum wage or less come from households that earn three times the poverty level.) Many of these kids will have work experience and skills that make them more appealing to employers. If you’re going to pay a higher wage, you will want a better employee.

There will be pressure on Overland Park employers to raise wages to keep workers on their side of state line. And Kansas City workers may then have to commute to Kansas to get the lower wage jobs that are suddenly available, but they may not have the access to transportation that their wealthier suburban job-seekers have. Kansas City’s urban poor will find themselves with fewer job opportunities locally and no good way to get to the jobs that are available to them outside of Kansas City.

There is no shortcut to creating an environment for more jobs and higher salaries—government cannot create wealth and success by fiat. Instead, local governments need to focus on delivering basic services efficiently and cost-effectively and on limiting taxes and business regulation.

The post A Minimum Wage Increase and the Unintended Consequences for Kansas City appeared first on Show-Me Institute.

The state minimum wage is currently $7.65. In 2015, the City of Saint Louis sought to raise the minimum wage on businesses within its borders. This initial attempt was struck down by a circuit court judge in 2015, but Tuesday’s ruling reversed that decision. As a result, the minimum wage that applies to businesses within Saint Louis proper (not the county or surrounding areas) will rise to $10 this year and $11 in 2018.

Saint Louis businesses will face higher labor costs, putting them at a competitive disadvantage against businesses located just across the city–county boundary. If I were an entrepreneur or business owner unsure of where to locate or expand, this minimum wage increase helped make the decision for me.

Show-Me Institute analysts have written many times about the effects of minimum wages hikes; see here and here for two examples. There are two main effects from this wrongheaded action.

First, and most obvious, raising the minimum wage imposes higher costs on businesses. Some of those businesses simply will not be able to maintain current operations: they will reduce the number of workers they employ, close up shop, or move. Why is it that supporters of the minimum wage hike have so much disdain for small business owners? After all, not every employer is McDonald’s.

Liberals and conservatives alike recognize that increases in the minimum wage will negatively affect exactly those workers for whom proponents claim to be champions; namely, the least skilled, entry level workers whom this higher wage will make even more unemployable. This is perhaps the most pernicious (there’s that word again) effect of all: Of the city’s estimated 69,000 individuals earning less than $11 an hour, how many will lose their jobs or face reduced hours? Can proponents claim success if the number of employed individuals declines by 6, or 600, or 6,000? It is bad policy that claims success on the backs of those made worse off.

And how many of those who are harmed by this latest minimum wage increase will we see interviewed so that the public understands how they were put out of a job by this unwise intervention? My guess is that the answer is zero. Out of sight, out of mind.

Lawmakers and union leaders will now sing their own praises and pat themselves on the back for the “good” they have done—no matter how much harm is done to workers and business owners.

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But exactly how many Missourians would be put at risk if the state actually went through with such a hike? In a recent study, the Heritage Foundation puts a number to the cost of a $15 minimum, suggesting that the full-time equivalent job losses in Missouri could reach a staggering 218,000 if such a wage became law. The problem isn't just that a massive hike would imperil the jobs of the lowest-paid workers; rather, every worker paid a wage between the old wage and the new one would suddenly be put at risk by the government, as well.

Fifteen-dollar-per-hour mandatory starting wages would cover roughly one-third of U.S. wage and salary workers—considerably more than the minimum wage has ever covered.[6] Existing minimum-wage studies shed little light on the number of jobs a $15 mandate would cost, as they examined much smaller minimum-wage increases that affected relatively few workers. In fact, most of the studies look only at sectors significantly impacted by past increases, like teenage employment or the restaurant sector. These studies provide little guidance on the effects of a minimum wage covering one-third of the workforce.

However, economists have extensively studied how businesses respond to higher wages overall, not just minimum-wage increases.[7] On average these studies find a 10 percent increase in labor costs causes firms to reduce employment of less-skilled workers by 6.8 percent in the long run.[8] This is not a precise estimate—some studies find greater job losses, others find lower. This figure does indicate, however, the approximate magnitude of job losses that occur when labor costs rise.

Contrary to what "Fight for $15" supporters might suggest, simply raising the government-imposed minimum wage for the employed isn't an effective way to help our poorest citizens. Rather, such a move could dramatically harm them, thousands of others in Missouri, and millions nationwide. There are many ways to improve the lot of low-wage earners, but government tinkering in the labor market with minimum wage manipulations is neither a serious nor effective means to that end.

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This February, Doug McMillon – the current CEO – agreed to raise the hourly wage at Wal-Mart to no less than $9 an hour in April and to $10 an hour (or 33 percent above the current federal minimum wage) in early 2016.

How is the sharply elevated internal “minimum wage” working out for the world’s largest retailer and (by a wide margin) the nation’s largest private employer?

So far, not at all well.

In announcing the company’s third-quarter results this Tuesday, McMillon acknowledged that the wage hike had been “by far the biggest driver” in causing a 13.3 percent reduction in corporate earnings over the first nine months of its current fiscal year (ending on Jan. 31, 2016). Higher wages have added $1.2 billion in annual costs in this fiscal year and will add another $1.5 billion in costs next year.

Net income at Wal-Mart hit an all-time high of $17.0 billion in calendar 2012 (fiscal 2013, ending in January 31, 2013). According to Value Line estimates, it will drop to $14.8 billion at the end of this year and to $12.6 billion next year, which would be the lowest annual earnings for Wal-Mart in a decade.

That is no big deal to critics like Robert Reich, who served as Secretary of Labor under President Clinton. Reich pointed to Walmart and McDonald’s in a petition that he launched on MoveOn.org in 2013 urging the biggest employers to increase wages so workers can finally “get a fair share in this economy.” “Your typical employee is now earning $8.25 to $8.80 an hour,” Reich wrote. “They [Walmart and McDonald’s] can easily afford to pay [workers] $15 an hour without causing layoffs or requiring price increases.”

In regarding any profit as proof that a company can afford to pay more to its workers – without doing harm to its customers – that viewpoint disregards the realities of a competitive marketplace.

For one thing, Wal-Mart competes with other public companies in striving to maximize returns to shareholders. To say that Wal-Mart has been getting hammered in this regard is something of an understatement.

Wal-Mart’s shares have lost a third of their value since the beginning of this year – falling from a high of $90 a share in January to $60 at the close of business on Nov. 17. Meanwhile, its biggest rivals have done substantially better. Costco has climbed from $140 a share to $159, and Amazon.com has more than doubled in price.

In July, Amazon passed Wal-Mart to become the most highly valued company in the retail sector and it has shot further and further ahead since then. It now has a total market capitalization of $308 billion, compared with $195 billion for Wal-Mart.

Wal-Mart lags far behind both Amazon and Costco in productivity – measured in sales per employee, with Wal-Mart at $219,000, Costco at $565,000, and Amazon at $578,000. It is clear that Wal-Mart is intent on closing the gap by slowing the growth of bricks-and-mortar stores while putting much greater emphasis on e-commerce. As McMillon put it in his presentation on Tuesday:

We will be the first to deliver a seamless shopping experience at scale. No matter how you choose to shop with us – through your mobile device, in a store or a combination – it will be fast and easy. Online retailers are testing physical store experience because they recognize the same customer desire that we do. There’s a race to do this right.

But consider the impact on total employment at Wal-Mart if the company were to close the productivity gap between itself and Amazon by 25 percent over the next three years while also achieving its stated objective of growing annual sales from about $485 billion to $530 billion or more.

In this situation, Wal-Mart would need a global workforce of 1.7 million associates, compared to the 2.2 million it has now – a loss of approximately 500,000 jobs. That would entail a loss of about 320,000 associates out of the U.S. workforce of 1.4 million associates.

While those numbers are speculative, they clearly point to the conclusion that Wal-Mart will no longer be the great job-creation machine that it was years past, which is something that self-declared champions of working class should be thinking about in agitating for higher wages. Paying higher wages has made the company more focused on achieving higher levels of productivity.

At the same time the company may water down if not abandon its historic commitment to serving less affluent shoppers with rock-bottom prices across a vast array of merchandise. The late founder Sam Walton said his dream was “to serve the under-served.” That is less of a priority today. “Globally, we know growth will come from middle- and upper-income households in years ahead,” McMillon stated at an analysts’ meeting in October.

The post Killing the Golden Goose: How Walmart’s Left-Wing Critics Destroy Job Creation appeared first on Show-Me Institute.

You can read the Court’s decision here. Basically, the Court ruled that the ordinance conflicted with existing state law and thus was invalid.

Mayor Slay has promised to appeal to ruling, but assuming this ruling stands, we are left with the question of how best to help those working families who are struggling to get by on the current minimum wage.

Increasing the minimum wage, either at the local, state, or federal level, is not the way to go. Instead, the state and/or federal government should look to expand the Earned Income Tax Credit (EITC). Economists across the ideological spectrum agree that the EITC is a program that is better targeted to helping the working poor.

The EITC is a better policy than increasing the minimum wage for at least two reasons. First, it is specially targeted toward low-income households. If the minimum wage goes up, a teenager from an upper-middle class family working a minimum-wage job would get the same benefit as a single mother of two. The EITC goes only to members of low-income families who are working. Second, unlike an increase to the minimum wage, the EITC does not increase labor costs for business owners. Thus, an expansion of the EITC would not cause businesses to reduce hours or lay people off.

A lot of people might be upset by the Circuit Court’s ruling yesterday. However, this ruling provides policymakers with an opportunity to enact policies that can better help those who need it. The EITC is one such policy.

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Why is his opinion important?  Because he is the author of one of the most influential studies touted by those promoting an increase in the minimum wage.

Together with David Card of the University of California–Berkeley, Krueger analyzed the impact of an increase in the minimum wage on employment in fast-food restaurants. In 1992 New Jersey raised its minimum wage from $4.25 to $5.05 while Pennsylvania did not.  Their analysis found that fast-food restaurant employment growth in New Jersey was not adversely affected by the change.  This isolated case study from several decades ago has become, even though it is much criticized, the go-to piece of research touted by minimum wage advocates ever since. 

A proponent of raising the minimum wage, even Krueger recognizes that increasing it to $15 would likely do more damage to workers than good.  Especially to those workers at the low end of the pay scale.  Especially to those workers who live in a city like St. Louis, which is not a high-wage/high-cost city.  Increasing the minimum wage to $15 in St. Louis, as some have proposed, would devastate low-income workers in two ways.  First, some businesses would decamp to surrounding areas with lower minimum wages. And of the businesses that stayed in Saint Louis city, many would cut employees or reduce hours in order to control their labor costs. The trade-off for increasing the minimum wage to $15 is just too great to be sensible.

Krueger recognizes that there is a viable alternative to a minimum wage hike: the earned-income tax credit.  This tonic to the plight of the low-income family has been recommended by those on the left and the right as a better solution to the poverty problem than the use of a blunt tool like the minimum wage.  Christina Romer, another University of California–Berkeley professor and one-time chair of president Obama’s Council of Economic Advisors wrote in The New York Times in 2013 that the earned-income income tax credit “is very well targeted—the subsidy goes only to poor families—and could easily be made more generous.”

Krueger warns that the possibility of negatively affecting employment for low-income workers by raising the minimum wage to $15 “is likely to become more severe, and the risk greater.”  If proponents will not listen to the warnings of free-market economists, will they at least consider Krueger’s counsel before acting rashly?

The post Even Krueger Agrees: $15 Minimum Wage Too High appeared first on Show-Me Institute.

Speaking of the restoration of the centuries-old Bourbon monarchy — following the massively convulsive interlude of 22 years between French Revolution and Napoleon’s defeat at Waterloo in 1814 — Talleyrand quipped, “They [the Bourbons] have learned nothing and forgotten nothing.”

On a smaller scale, the same judgment applies to the lessons learned (or studiously ignored) in a lengthy report released last week into the “underlying issues” behind the riots and looting that erupted in the St. Louis suburb of Ferguson (pop. 21,200) following the shooting death of a young black man by a white police officer on Aug. 9, 2014.

Commissioned by Missouri Gov. Jay Nixon, the report is long on liberal pieties and dogma, including the advocacy of some policies that will only worsen existing problems, but short of practical suggestions for improving economic or social conditions in a close-in, big-city suburb that went from predominantly white to predominantly black in the space of two decades.

For example, the Ferguson Commission calls for expanded job opportunities for black youth. Who can argue with that? As the commissioners point out, for blacks aged 16 to 19, the unemployment rate (nationally) is 30.1 percent, compared with 15.5 percent for whites in the same age group. But then the report endorses calls for almost doubling the minimum wage to $15 an hour.

The adverse impact of a dramatic increase in the minimum wage on teenagers looking for their first jobs should be clear to anyone who stops to think about it. If a business is forced to pay $15 an hour to a worker whose true value to the enterprise is, say, $8 an hour, that amounts to a hidden tax of $7 an hour, or 87.5 percent, on the employment of that person — a tax that does not apply to people making, say, $20 or $30 an hour. Naturally, such a tax would encourage employers to invest in automation and concentrate their hiring on more skilled and experienced workers. As Milton Friedman put it, “The minimum wage law is most properly described as a law saying that employers must discriminate against people who have low skills.”

The commissioners call for concerted efforts to “enhance college access and affordability” through expanded scholarships and other means, but they ignore the biggest problem: poor test scores and a lack of readiness for college. In the Normandy school district — Michael Brown’s alma mater — 93 percent of students who took the standard college entrance examination scored below the national average. Normandy students taking the ACT test had an average score of 16 —not high enough to gain admittance to most four-year state institutions. It isn’t funding that is keeping these students from going to college. It is their abysmal K-12 preparation.

Predictably, the Ferguson Commission urges the state to invest in a universal pre-K program and move the compulsory education age down to 5 from 7. This would become a new (and hugely expensive) entitlement, while adding another layer onto K-12 schools that are not meeting the needs of low-income, African-American students (who make up 80 percent of Ferguson-Florissant students and more than 96 percent of students in nearby Normandy). How is expanding a broken system going to help anyone?

In its 198 pages, the Ferguson Commission Report calls for the expansion of a broad mix of other programs at multiple levels of government — ranging from food stamps and public transit to Medicaid and housing assistance — and it recommends a panoply of new programs to raise the awareness of police officers, teachers, and other public officials of the danger of unconscious or unintentional racial bias.

“In the 2011-12 school year,” the report notes, “14.3 percent of black elementary school students in Missouri were suspended, compared to 1.8 percent of white students.” It then adds, “Research suggests that some of the discipline gap may be attributed to teacher bias, which predisposes them to expect less of minority students and to discipline them more frequently and more harshly.”

However, the report makes no attempt to assess, or discuss, what part of “the discipline gap” — if any — may be due to other reasons — including the high incidence of low-income black children growing up in single-parent homes, with no live-in, working fathers.

Among the 189 “calls to action” contained in the report, one of the more startling recommendations is the complete elimination of all school suspensions and expulsions for disruptive behavior from kindergarten through third grade.

At the outset of the report, the commissioners give themselves a broad pass in describing their work as “a study of underlying issues — not an investigation of an incident.” They write:

This report is not in any way an investigation of what happened between Michael Brown Jr. and Officer Darren Wilson in Ferguson on August 9, 2014, nor is it an investigation of the response to the uprising that followed. Other bodies have been responsible for those investigations.

For the record, it should be noted that Officer Wilson was twice cleared of charges of any wrong-doing in the death of Brown: First, by the Saint Louis County grand jury’s decision not to bring murder or manslaughter charges against him, and second, in an 86-page report by the U.S. Justice Department in early March which supported that decision.

Over the past 12 months, numerous newspaper and magazine articles have called attention to the widespread misuse of local police and courts in Saint Louis County (including Ferguson) as de facto tax collection agencies — imposing heavy fines and fees for minor traffic violations and other municipal code infractions while often jailing people for failure to pay tickets.

The Ferguson Commission report rightly condemns such practices (as did the U.S. Justice Department in a separate investigation of Ferguson Police Department procedures). In July, Gov. Nixon signed a bill into law that greatly limits the extent to which municipalities can rely on fines and fees to fund themselves.

On balance, however, the Ferguson Commission fails in its stated purpose of “outlining a (new) path to racial equity.” For the most part, it is a compendium of tried-and-failed liberal policy recommendations.

The post The Liberal Solution To Ferguson, Mo? More Liberalism appeared first on Show-Me Institute.

·         Iron Barley – Tom and Gen Coghill started Iron Barley in 2003 and were the first business to start Dutchtown’s contemporary revitalization. Several Food Network television shows have featured their food. They also put on an annual Tomato Fest; proceeds from the festival go to help local charities.

·         Urban Eats –Caya Aufiero and John Chen started Urban Eats 7 years ago with the express purpose of helping revitalize Dutchtown. Urban Eats shares space with an art collective and hosts community events such as a regular board game meet-up.

·         Sister Cities – Pam Melton and Travis Parfait started Sister Cities in 2013. The restaurant serves Cajun food and barbeque. A local Bitcoin group meets in the restaurant once a month and, as with Urban Eats, art from locals decorates the walls.

I spoke with the owners of all three of these restaurants about the minimum wage hike (parts of my interviews can be seen here). The bottom line: the mandated wage increase will harm this community. Increasing the minimum wage from $7.65 to $11 will force these restaurants to restructure in order to remain profitable. This could mean laying off employees, moving to the county, or perhaps even shutting down.

Travis Parfait, co-owner of Sister Cities, told me that with an $11 minimum wage, he might have to cut out much of his staff completely and work the front of the house himself. “Restaurants are a very low profitability business, and if you increase one of the many costs by almost 50 percent . . .  it can’t hold it. It won’t bear that.”

It’s a similar story at Urban Eats, where John Chen says that poverty is a wider social problem that cannot be fixed by mandating minimum wages for employers. John calls the city’s minimum wage law the “sink or swim” approach: “Here’s the minimum wage increase, and you figure out how to cope with this. . . . That’s irresponsible. I argue that it’s unethical.”

The minimum wage hike is an another government-made obstacle to urban renewal—one that threatens to undermine the efforts of local business owners who have spent years working to help bring economic life back to their neighborhood. Without the jobs and community spaces provided by the people I spoke with, the revitalization of Dutchtown might be stopped in its tracks.

The post The Minimum Wage and Revitalization in Dutchtown appeared first on Show-Me Institute.

Their media release includes the following from Mayor James:

Workers in our cities and across the entire state work at one, two, or sometimes even three jobs, but they still cannot earn enough to provide for themselves and their families. This injustice creates a burden on state and city resources and stalls economic activity in Missouri. While we weren’t able to implement a local ordinance to raise the minimum wage in Kansas City, my commitment to pursuing this policy change has not wavered.

Not to be outdone, Mayor Slay discussed the statewide implications:

A living wage rewards work and alleviates taxpayers from the burden generated by employers who pay too little and whose employees must rely on government subsidies to fill the gaps created by the current minimum wage. Not only would a higher minimum wage benefit employers of our cities by attracting the best workforces, but also I believe that a higher statewide minimum wage would help Missouri attract the best workers in the region.

Kansas City and St. Louis have some of the highest taxes in the region. Both cities tax food, one of the most regressive forms of taxation and the most damaging to the poor. As we've written previously, not only does Kansas City levy regressive sales taxes, but its poor areas actually have a higher rate of sales taxes than wealthier areas. While some may argue that an equitable tax structure should broaden the base, what’s clear is that these tax policies are not written with any concern for the working poor. In fact, both cities also saddle workers with an additional 1% earnings tax, a tax imposed on the first dollar earned. There are no exemptions to spare the poor. And if a low-skilled worker in Kansas City is able to get a job in a restaurant, the city requires that they pay a food-handlers fee, something almost unheard of in the rest of the country. 

Both cities' public school districts suffer because the mayors and tax increment financing (TIF) commissions are eager to redirect property taxes to wealthy developers and away from the classrooms that would otherwise get the funds. Developers take the money and use it to build in the nice parts of town, away from the poor and legitimately blighted neighborhoods of Kansas City's East Side and St. Louis' North Side. Because of the disincentives of high city taxes and low city services, the city governments give out massive subsidies to businesses in the hope that they’ll stick around. 

While it's nice that the Mayors take time away from doggedly pursuing such "touristy frou frou" as streetcars, convention hotels, and airport terminals to consider the needs of workers, it is not enough. The need for sound economic policies in Kansas City and St. Louis requires a more serious approach. If mayors want to be advocates for the poor, they should focus on running their cities effectively and efficiently, rather than passing the buck in the form of wage controls. After all, increasing the minimum wage will likely hurt the very people it is intended to help.

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Some might see a silver lining in the fact that the minimum wage will “only” go up to $11 instead of $13 or $15 per hour. That lining, unfortunately, is hair-thin; an $11 per hour minimum wage is still likely to have serious, negative consequences for the Saint Louis labor market, hurting the very people it is meant to help. If enacted, the increase will make Saint Louis County even more attractive to businesses compared to the city, because the county will have a much lower minimum wage coupled with the lack of an earnings tax.

The timing of this proposal is significant; it was passed now so that it would be exempt from HB 722, which, if enacted, would bar cities from raising their minimum wages after August 28 of this year. However, even if the minimum wage proposal is enacted before HB 722 goes into effect, there are still legal issues with this bill. Namely, section 67.1571 of Missouri State Statutes states that “No municipality as defined in section 1, paragraph 2, subsection (9) shall establish, mandate or otherwise require a minimum wage that exceeds the state minimum wage.”

Of course, things are never as simple as we might hope with regard to state statutes. A Saint Louis Circuit Court did rule that 67.1571 is invalid on procedural grounds. However, no higher court has ruled on this, so the question of 67.1571’s constitutionality is still open.

Relying on the courts to come to the rescue is no substitute for avoiding bad legislation in the first place. Policymakers should realize that minimum wage increases are not the way to alleviate poverty—but if they don’t,  a court ruling that the increase is invalid would preserve the jobs of many low-wage workers in the city.

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It seems that there are those in the city who want to get some type of minimum wage increase passed before the Legislature has a chance to override Governor Nixon’s veto of HB 722, which would forbid municipalities from raising their minimum wages after August 28. What’s interesting to note is that even if the Board of Aldermen passes a bill before the August 28 deadline or the Legislature fails to override the Governor’s veto, Saint Louis probably lacks the legal authority to raise its minimum wage above the state minimum wage. Regardless, a $13 per hour minimum wage would be disastrous for the city and its workers.

The Congressional Budget Office studied the effects of increasing the federal minimum wage to “just” $10.10 an hour and found that it would cost 500,000 jobs. Now this 500,000 figure is a national number, but the effect on jobs would be especially pronounced if the wage went up at the local level, because companies forced to pay the higher wage can just hop across the city border to escape the mandate. Even the liberal Vox.com thinks that $13 per hour (never mind $15) would be too high a minimum wage for Saint Louis.

What about the other cities that have raised their minimum wages? If the recent evidence from Seattle is any indicator, things aren’t looking good.There are also some signs out of Los Angeles that might give policymakers in Saint Louis pause.

                Momentum is building in some parts of Saint Louis City government to increase the city’s minimum wage, as evidenced by the convening of a special session to debate the issue. However, that doesn’t mean that such a move would be good policy. A large increase (and going from $7.65 to $13 or $15 per hour would certainly qualify as large), will end up costing jobs  and failing to help the working poor. 

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Still, Alderman Joe Vaccaro, the acting Ways & Means chairman, has announced he is cancelling all future meetings on the minimum wage, potentially killing the proposal. A recently passed bill from the Missouri Legislature, if signed by the governor, would prevent any local minimum wage increases from going into effect after August 28. Given that the Board of Aldermen go on summer break starting July 10, this puts the minimum wage bill in a precarious position and will make it difficult for any minimum wage increase to be enacted.

I applaud this decision, and I hope no increase is enacted. Increasing the minimum wage will destroy jobs and do little to help those in poverty. I want people across the city and state to earn more in wages. However, increasing the minimum wage is not the way to achieve such a goal. Thankfully, some in the Board of Aldermen feel similarly.

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