Recent news from Walmart gives us a tangible example of the harm minimum wage hikes and other workplace mandates can cause.
The Washington Post reports that Walmart cancelled plans to build two stores in the District of Columbia, partly because of minimum wage hikes:
[Council member Jack Evans] said the company cited the District’s rising minimum wage, now at $11.50 an hour and possibly going to $15 an hour if a proposed ballot measure is successful in November. He also said a proposal for legislation requiring D.C. employers to pay into a fund for family and medical leave for employees, and another effort to require a minimum amount of hours for hourly workers were compounding costs and concerns for the retailer.
This, in a nutshell, is how a minimum wage increase hurts a local economy. It doesn’t cause businesses to cut jobs immediately. Instead, it prevents future jobs from being created.
It’s costly to close a store (or factory or warehouse). So once one has been built, companies will often do their best to deal with higher wage costs by adjusting business hours, automating some operations, cutting back on employee training, or postponing future planned improvements. Hiring more staff gets put on the backburner. The real effect is in the jobs not created, a number that is often difficult, or impossible to capture. Which is what makes this Walmart example so valuable—it presents a clear example of jobs that won’t be created.
It’s a classic case of “What is seen and what is unseen,” French economist Frederic Bastiat’s most important economic lesson. A minimum wage increase is seen: workers get higher pay. But what is unseen are businesses not hiring more workers or not investing more because higher labor costs keep them from making new investments—unless it becomes a story in a newspaper.
You can believe in coincidence or you can believe in economic reality, and which you choose will probably be a strong indicator of where you fall on the political spectrum. For Walmart, there’s a whole lot of coincidence going around at the moment.
Walmart is already struggling with the consequences of voluntarily phasing in minimum wages that are above federal requirements but below the $15/hour “living wage” insanity. The unseen consequences of that will be felt for a long time, but because they aren’t tangible they can’t be hung as failures around the necks of the people who advocate for them.
Because accomplished criminals know better than to leave evidence behind.