If you read the newspapers, you know that more than two dozen states raised their minimum wage on January 1 and that millions of Americans will be better off as a result. That of course is what you’ll read in the mainstream media. The reality is a bit different.
The reality is that a lot of people who had jobs in December will find that because of the hike in the minimum wage their employers will no longer be able to keep them on the payroll. Daniel Flynn quotes economist Milton Friedman’s dictum that the real minimum wage is zero:
“The true minimum wage is zero—the amount an unemployed person receives from his nonexistent employer,” Milton Friedman explained in his Newsweek column 43 years ago. The truth of Friedman’s quip hasn’t changed one bit even as government’s precise minimum an employer should pay employees has changed a few bits every few years.
Unlike many legislators, Friedman, a Nobel laureate, had real world work experience. In addition to his academic work at the University of Chicago, Friedman had been a salesman, a waiter, and a clerk. He began his work life in his family’s ice cream parlor as a kid. Friedman was able to appreciate that raising the minimum wage affected an employer’s ability to employ people.
The Wall Street Journal has a distressing story this morning about people who are now making zero because of the minimum wage hike in Michigan. These people worked for a nonprofit restaurant called Tastes of Life, which trained people who’d been down on their luck for jobs, and which has closed its doors because it cannot absorb the costs of the state's new minimum wage.
Tastes of Life was operated by a minister named Jack Mosley, who called the state’s minimum wage hike “the straw that broke that camel’s back.” Admittedly, the restaurant had also been struggling with the rising cost of food and that combined with the minimum wage hike put Mosley’s 12-person staff on the unemployment rolls.
Tastes of Life sounds like the kind of venture that made a difference in people’s lives:
Mr. Mosley’s popular restaurant was a nonprofit and served as a training tool for participants in Life Challenge of Michigan, a nondenominational, faith-based organization he directs. Life Challenge, Mr. Mosley told me, is a refuge for people who have “bottomed out,” often due to alcohol and substance abuse. After a six-month period of detox and spiritual education, the program shifts to focus on practical skills, like building a budget, finding a job, and keeping a daily routine.
That’s what the restaurant helped provide. The staff at Tastes of Life was made up of recovering addicts, recently incarcerated individuals and others who would have a hard time landing a job elsewhere. Mr. Mosley explained that on-the-job offenses for which an employee would have been “gone that day” in a traditional work setting were instead used as training opportunities at Tastes of Life.
One former employee, Makenzie Wirick, had serious balance problems following an auto accident. She eventually gained the confidence to wait tables and carry trays—first a “small tray of drinks,” she told me, and later full trays of food. This was thanks to a work environment where spills and accidents were tolerated and even expected.
The restaurant had attracted a loyal clientele but not one that could pay big prices. To make ends meet, Mosley would have had to hike the charge for what was a $10 item to $14. The restaurant closed shortly after it became clear that there was no way to avoid the minimum wage hike.
For some employees, their new wages are zero:
Four former employees have been able to leverage their restaurant experience to find new employment, but Mr. Mosley told me that eight are still out of work. One of the still unemployed told me that Tastes of Life was his first job out of prison, and he wasn’t sure he’d have a job at all if Mr. Mosley hadn’t given him a chance.
Tim Ritchey, a former program participant who is now the men’s director for Life Challenge, said this was a reality for many participants. “Working in the restaurant gave them a sense of belonging to something again,” he told me. Today that’s mostly gone: “Without the restaurant here, they don’t really have a place they can go to every single day.”
Or a paycheck. But this is not the side of the story you’re going to hear from the politicians who are breaking their arms patting themselves on their backs for hiking the minimum wage.