Why John Morgan’s $15 minimum wage doesn’t make cents

by | Jun 17, 2020


This November, you have a choice: protect small businesses in the state that employ over 3.3 million people, or doom the lifeblood of Florida by going along with an orchestrated plan by Orlando attorney John Morgan.

A $15 minimum wage would be a disaster for the state of Florida, as well as small firms that make up 99.8 percent of all businesses in the state.

Minimum wage is invariably supposed to be an economic decision. Morgan and other advocates predicate a wage hike on a moral vision of the world that is false. To them, business owners have a hidden agenda: swim around in a vault of gold like Scrooge McDuck, hoarding wealth while simultaneously preventing employees from making a decent living.

This fantasy has now become a reality in their minds. But such an economic worldview is catastrophic for any state, let alone one as big as the Sunshine State. Here’s why:

A $15 minimum wage would result in massive layoffs

The chief issue with a $15 minimum wage is that it is economically ignorant. Competition in wages leads to lower wages, just as competition in products leads to lower prices for products, Artificially increasing the price of labor cuts out the profit margin, resulting in an employee getting fired.

Under this system, a net loss in employment is inevitable. It’s basic economics: if you have $50 to spend on five employees ($10 apiece), an increase in the wages would lead to a subsequent layoff.

In order to survive, employers would have to reduce hours, resulting in a drastic pay cut for the employees who manage to keep their jobs. These extreme cost-cutting measures to avoid an inevitable shutdown would result in a host of negative externalities, including loss of production, benefits, and overall health of an organization.

This is especially true in the restaurant business. A study by the Harvard Business School, “Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit”, found that for each $1 increase in minimum wage results in a 4-10% increase in the likelihood of restaurants closing.

“The study examined the impact of higher minimum wages on the thousands of full and limited-service restaurants in the cities surrounding the San Francisco Bay, which includes major cities like San Francisco, San Jose, and Oakland.  Cities in that region have led the nation in passing laws increasing local minimum wages.  Among the 41 cities and counties that have increased minimum wages at the local level since 2012, 15 were in the Bay Area, with 21 total Bay Area minimum wage increases during the study’s sample period from 2008 through 2016.  The minimum wages in more than a dozen Bay Area cities have increased, or are set to increase, in 2017,” says the Washington Policy Center.

Most employers pay workers what they can, and finding and keeping good employees is a difficult proposition, This could lead to a high turnover rate, stifling growth in any enterprise trying to make it.

The fallout from COVID-19 makes it harder to achieve

If a $15 increase in the minimum wage was a bad idea from the jump, the idea of crippling those who invested their savings into starting a business given today’s current economic climate would be akin to Fonzie “jumping the shark.”

COVID-19 devastated Florida industries, the state’s revenue, and employment numbers. As a result of the pandemic, there have been more than 930,000 employees in the hospitality industry who have lost their jobs.

Florida businesses on a macro level were also devasted by the pandemic. According to a survey of 567 small businesses conducted by Florida State University, 15.2 percent – or about 86 – will not reopen after being shut down by the response to coronavirus.

“The May survey, funded by the Jim Moran Institute for Global Entrepreneurship in FSU’s College of Business, found 14.5 percent of businesses closed temporarily during emergency shutdowns, 31 percent are now operating below 40 percent capacity and nearly 40 percent are operating at 40 percent capacity or higher,” The Center Square reported on Tuesday.

If employers are forced to raise minimum wages (which means those already making that amount now would likely also have to be raised therefore creating wage compression issues), they will be forced to lay off workers, reduce hours, reduce benefits, increase automation, and more IF they can even survive.

Simply put, a $15 minimum wage with lead to an undue burden on businesses still trying to recover from a worldwide contagion.

Entry-level positions should not be the endgame

Let’s face it: minimum wage was never intended to be a living wage; rather it is a starter wage for employees to get their foot in the door and progress into non-hourly positions.

That said, an entry-level position is valuable to young people looking to gain the critical experience needed to move up the workforce ladder. Young adults need these part-time and low wage positions to grow — especially young minority folks, who disproportionately staff these jobs. By raising the minimum wage to $15, these once entry-level positions now become more appealing to older workers looking to make a little extra money. With the added experience, higher skills and maturity, these adults will be competing against younger candidates who’ll need more training and supervision.

While not the most glamorous positions, entry-level jobs are essential in an economy that values work experience over a college education. If you’re going to $15 to someone who flips burgers, they better have another skill set at their disposal.

That’s not to say it isn’t an honorable job. It’s important to work these positions in order to climb the ladder of success and achieve upward mobility.

Strictly put, these positions are a crucial step on the path to a professional career.

What’s the fix?

In truth, a $15 minimum wage hike will not lead to economic prosperity. Prosperity comes from entrepreneurs who are willing to invest money into ROI and technology.

There’s a reason people like Bill Gates and Steve Jobs have done more for our economy than any politician. These men have produced more jobs, more products, and more advancements than any $15 minimum wage ever could. Because of their investments, we now have better products and services — laptops, Iphones, etc. — that make our lives infinitely better than lives were 50 years ago.

Do you work for a poor person? Chances are, the answer is no. Economic growth will only occur when those with capital and resources invest their money, time, and energy into the future of their company: the workers.

Morgan and his team are delusional if they think a $15 minimum wage will solve Florida’s problems (see Seattle). People like him view economics through a moral lens instead of seeing the bottom line. For those on the political left, feelings over facts take center stage; and every argument is morally driven instead of being economically laden.

I guess John Morgan should change his slogan to “Against the People.”

2 Comments

  1. B. Banner

    Thats what she said!!

    Reply
  2. Bob Schilling

    Increasing the minimum wage will only result in an increase in the cost of goods and services. So great, you now make $15 an hour, but now a loaf of bread will cost four dollars and a gallon of milk five dollars. The problem is corporate greed not low wages. Corporations are not going to cut their profits just to pay their employees more. They will simply raise their prices.

    Reply

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