Why Congress Shouldn’t Emulate Amazon

Original Article: http://www.rollcall.com/news/opinion/congress-should-not-emulate-amazon

  • Author: Michael Saltsman

  • Publication Date: October 2018

  • Newspaper: Roll Call

  • Topics: Living Wage, Minimum Wage

Does Amazon’s embrace of the Fight for $15 mean Congress should do the same?

New Jersey Rep. Donald Norcross recently made that case in these pages, arguing that the retail giant’s embrace of a $15 minimum wage meant other businesses could afford it as well. But Norcross’ argument confuses a voluntary raise with an involuntary mandate: One boosts paychecks; the other could leave employees without any pay at all.

Today, a smaller percentage of the hourly workforce earns the federal minimum wage than at almost any time in the past 40 years. Since the last federal hike in 2009-10, the number of employees earning the federal minimum wage has fallen in every year. Norcross and other proponents lament that the pay floor has been “stuck” since that time, but employees haven’t been waiting on the federal government to give them a raise.

Research from economists at Miami and Trinity Universities finds that, historically, most minimum wage employees earn a raise in their first 1-12 months on the job. In today’s tight labor market, the size and speed of that raise have been accelerated.

Target, Walmart, McDonald’s, Amazon and dozens of other large employers have announced starting pay rates far above the federal or relevant state minimum wage. (Norcross laments the “heinous tax scam” passed by a Republican Congress last year, but many companies voluntarily offered bonuses or raises in direct response to this so-called “scam.”)

The news of Amazon’s voluntary raise was soured by the company’s announcement that it would lobby for an increase in the federal minimum wage, creating a new mandate for its smaller competitors to deal with. Amazon should know better: Its hometown of Seattle offers all the proof Congress should need of what happens when government tries to raise wages to $15 through a mandate, rather than letting market forces do their work.

A team of researchers at the University of Washington, who were originally funded by the City of Seattle, reported that employees lost $125-per-month on average as a consequence of the city’s minimum wage experiment. Employees who were supposed to benefit from a boost in their hourly wage rate saw their work hours cut when employers couldn’t offset the wage costs. (These researchers lost their funding after reporting this inconvenient truth to a City Council that wasn’t interested in hearing it.)

Some businesses in Seattle closed their doors altogether. Weaving WorksLouisa’s Cafe,  and Z Pizza are just a few of the businesses that couldn’t survive the city’s embrace of the Fight for $15. (Their stories and others are featured on the website FacesOf15.com.)

One owner put it this way: “Seattle is no longer an environment where our business model works.” One business owner who supported a rising minimum wage — Felix Ngoussou of the Lake Chad Cafe — even admitted that he had been forced to cut half his staff due to the law’s costs.

If a $15 minimum wage — which is double the historic federal wage precedent — is too radical for Amazon’s high-wage hometown of Seattle, imagine would it would do to Sioux Falls, St. Louis, or even Seaside Heights.

Amazon is free to raise its own starting wage to $15, $20, or even $25 — if it believes its customers will pay the correspondingly higher prices to offset the cost. (Given that Amazon Prime customers pay for the privilege of using the site, this is probably a safe bet.)

But what works for one of the largest retailers in the country doesn’t work for the country’s smallest. It’s a good lesson for Norcross as he charges ahead with his own misguided fight for $15.