Thomas Aiello: Doubling Florida’s Minimum Wage Will Devastate Family-run Small Businesses

by | Aug 26, 2020

Given Florida’s commitment to low taxation and limited government, it’s not surprising that the economy here is booming. Business-friendly policies and low taxes are the not-so-secret reason Florida continues to lead the country in job creation, GDP growth, and inbound migration. Unfortunately, a November ballot measure has the potential to undermine Florida’s commitment to jobs and decimate small businesses across the Sunshine State. So Florida voters beware: 2020 is more than just a presidential election year; this election day economic growth is on the ballot.

The ballot initiative in question is called Amendment 2, which would constitutionally mandate a $15 hourly rate for all workers in Florida by raising the wage floor by $1 each year until it reaches $15 in 2026. As it stands, the state minimum wage is $8.56 – which is about $1.50 higher than the federal rate. To that end, a 75 percent increase would make Florida an outlier among most states in the Southeast, and even out of step with most of the rest of the country.

Voters may wonder why higher paychecks would leave low wage workers worse off. After all, isn’t more money in workers’ pockets a good thing? 

Government mandated price controls never seem to work and often have adverse impacts. One unintended effect of higher labor costs is the incentive for some larger businesses, like fast food chains or grocery stores, to automate some jobs currently held by actual workers. For these types of businesses, which usually have greater access to capital, it may make more sense to invest in self checkouts or automated cashier kiosks. Unfortunately,small businesses typically do not have the same level of capital to invest in automation. That means higher wages will balloon labor costs, forcing many “mom and pop” shops to lay off employees, slash workers hours, delay hiring additional workers, raise prices on consumers, or close their doors for good. As we’ve seen in other states these aren’t just theoretical arguments, but an economic reality. 

Numerous studies confirm the trend of negative economic consequences associated with minimum wage increases. At a micro level, when Seattle sharply increased their wage, the University of Washington found the number of hours worked in low-wage jobs decreased by nine percent, approximately costing workers $125 per month. Faced with rising labor costs, employers were forced to cut hours and seek out alternatives, such as automation to compensate for the increased wages. Further, a 2017 Harvard University study found that higher minimum wages in California’s Bay Area have resulted in an increase in overall restaurant closures. 

In the eight states that have begun to increase their hourly wages to $15, the average GDP growth was a meager 1.8 percent in 2019 – a full percentage point lower than Florida’s growth over the same period. This level of anemic growth could be coming to a town near you. While Florida-specific data isn’t available, a recent Congressional Budget Office report found that a national minimum wage of $15 could result in up to 3.7 million low-wage workers losing their jobs – a staggering figure.

Of course every American wants their neighbor to earn more money, but is it the responsibility of the government to institute wage mandates to achieve such an outcome?

Sure, some workers who retain their job will have more money in their pocket after each paycheck. But for the many who lose their job, have their hours cut back, or struggle to find new employment, they will undoubtedly be worse off.

Attempts to apply a one-size-fits-all starting wage across the state, including rural counties and less affluent neighborhoods in big cities, will disproportionately hit these communities harder. That’s because the ballot measure fails to take into account the stark regional differences in the cost of living or available jobs. Voters should carefully consider the wage burdens employers have on the smaller, rural communities.

A better approach to boosting wages is to double down on successful efforts to get government out of the way – mainly through tax reforms and deregulation. Allowing businesses to keep more of what they earn will allow them to put more money into workers’ pockets – and competition for workers will raise wages more than government mandates ever could. Less government, not more, will lead to greater prosperity for all workers regardless of income and skill levels.

Thomas Aiello is a policy and government affairs manager with the National Taxpayers Union, a nonprofit that advocates for taxpayer interests at all levels of government.


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