President Joe Biden is trying to get Congress to pass an increase in the federal minimum wage as part of a COVID-19 “stimulus” package. However, a recent experiment in mandating higher wages at the local level ought to make him think twice about doing so on a national basis.
In January, the city of Long Beach, California, decided that grocery-store employees deserved hazard pay for doing their jobs in the era of COVID-19, a virus with a survival rate of more than 99.7 percent.
Marc Perrone, international president of the United Food and Commercial Workers (UFCW) union, praised the move, saying, “City leaders stepped up to take care of these essential grocery workers and ensure they receive hazard pay for the danger they face.”
Did officials personally fork over the hazard pay when they “stepped up to take care of” the workers? Of course not! They simply decreed that “grocery stores with at least 300 workers nationwide and more than 15 employees within Long Beach … pay an extra $4 an hour for a 120-day period,” reported CBS News.
This mandated wage increase, which the “progressive” Brookings Institution called “a promising model for other local governments across the country to replicate and build on,” came on top of a state minimum-wage hike to $14 an hour.
Soon after the law went into effect, Kroger, the nation’s largest supermarket chain, announced that it was closing two of its Long Beach stores.
“As a result of the City of Long Beach decision to pass an ordinance mandating extra pay, we have made the difficult decision to permanently close store locations in Long Beach,” a Kroger spokesperson told CBS. “This misguided action by the Long Beach City Council oversteps the traditional bargaining process and only applies to some, but not all, grocery workers in the city.”
Obviously, the stores, which were already struggling, could not stay afloat if they were forced to pay their employees an extra four dollars per hour, so they are closing. Now the “essential” workers in those stores will forfeit not only the “hazard pay” their generous benefactors on the city council voted them but also the rest of their wages and benefits. The stores’ customers will also be harmed, possibly having to travel farther and pay higher prices for groceries.
Perrone blasted Kroger’s decision. “Kroger closing these stores is truly outrageous conduct and a ruthless attempt to create a chilling effect that will discourage other cities from doing what is right and enacting hazard pay mandates that recognize the threat these workers face from COVID-19,” he said.
But what is “outrageous” and “ruthless” about Kroger’s trying to keep its stores operating in the black under the terms of a contract to which both the company and UFCW agreed — one that did not include this so-called hazard pay? Far more “outrageous” and “ruthless” is Long Beach’s putting a gun to the head of Kroger’s management and ordering them to pay up or else.
Kroger also has good reason to try to discourage other cities from following in Long Beach’s footsteps. Already, two other California cities, Montebello and Los Angeles, have implemented similar measures, and another, Pomona, is expected to consider one.
A study commissioned by the California Grocers Association (CGA) found that the Los Angeles ordinance “would raise grocers’ labor costs by about 28 percent and would be twice the size of the of the 2020 industry profit margin and three times the historical grocery profit margins,” according to CBS Los Angeles. Such a move will undoubtedly cost jobs and lead to store closings. If grocers decide to pass along all the costs to consumers, they will pay an extra $450 million a year for groceries, the study said.
“Extra pay mandates will have severe unintended consequences on not only grocers, but on their workers and their customers,” said CGA President and CEO Ron Fong. “A 28 percent increase in labor costs is huge. Grocers will not be able to absorb those costs and negative repercussions are unavoidable.”
Similar negative repercussions will occur nationwide if Congress and the president increase the minimum wage. Those businesses that haven’t already been destroyed by the lockdowns will be forced to take other unpleasant measures to remain afloat under this additional imposed cost. Some, if not all, will raise their prices. Others will lay off employees or cut their hours. Some, finding it impossible to turn a profit, will simply close up shop, putting all their employees out of work.
And who will be harmed the most by these measures? The very people Biden and his fellow Democrats claim to champion!
“The net effect of higher minimum wages is … to increase the proportion of families that are poor and near-poor,” concluded a 2005 study published in the Journal of Human Resources.
If Biden really wants to help the poor, he should oppose any attempt to raise the minimum wage and instead concentrate on reducing taxes and regulations that inhibit economic growth and discourage employers from hiring low-skilled workers. But since that would make people less dependent on government and therefore less likely to vote for politicians like Biden, don’t expect him to take this advice.
The post The Hazards of Government Wage Mandates appeared first on The Future of Freedom Foundation.
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