Washington, D.C., is one of the hippest places to live and one of the most expensive, which is partly why lawmakers approved a new $15 minimum wage this week.
However, this new bump in pay will have the unintended consequences of hurting low-pay and low-skilled workers. We know this because according to employers it already has.
As my colleague Charlotte Hays reported yesterday, Washington D.C. joins New York and California as well as a few coastal cities in bumping up the pay floor for all workers in the city. Currently, the minimum a worker can earn is $10.50 (up from $8.25 in 2014) and it is scheduled to float up to $11.50 next month. Under a measure passed by a preliminary vote yesterday, it would continue to increase by 70 cents annually until it reaches $15 per hour in 2020. Following that, automatic annual increases would be tied to inflation.
However, findings from a new survey by the Employment Policies Institute confirm that since 2014 increased wages have forced D.C. employers to either lay off employees or reduce the hours of their workers. In addition a family leave policy funded by employers has also contributed to added financial pressure.
Two thirds of businesses surveyed agreed with the sentiment that D.C. is becoming un-friendly to business and half in strong agreement.
Even before minimum wage increases, business were already employing cost-saving strategies, as the report explains:
“Employers affected by the proposed increase to a $15 minimum wage were asked if they had either reduced the number of employees on their staff, or reduced the hours of current employees, to adapt to recently enacted minimum wage increases. Nearly half of employers surveyed had already taken one of these steps—suggesting that 2014-16 minimum wage increases haven’t been absorbed through higher prices alone.”
However, given that the new minimum wage is guaranteed, to offset the costs the range of options that employers may take will become likelihoods. Just over half planned to raise prices, but that won’t be enough. Just over half of employers (51 percent) are likely to reduce staffing levels with 35 percent responding that they are very likely to do this.
Some 57 percent reported that they would likely reduce employees’ hours or their business hours of operations. Some 37 percent strongly indicating they would so. Sadly, about one in five (20 percent) of businesses reported that they would likely close (6 percent saying very likely). In addition, one in five businesses would strongly consider moving across the Potomac to Virginia where the minimum wages is just $7.25 per hour (less than half of D.C.’s new minimum wage).
City officials who are cheering should listen to local businesses before pushing ahead with such a dangerous agenda. Speaker of the House Paul Ryan (R-WI) spoke out against the new minimum wage when he outlined a new poverty program yesterday in one of Washington’s poorest neighborhoods:
“I think it will do more harm than good, because what it does is it prices entry-level jobs away from people.”
However, the city’s mayor, Muriel Bowser, dismissed Ryan’s criticism and warning as a recycled argument. The Washington Post reports:
“Bowser said she was attuned to those concerns but said that as long as the city remained “hip” and “safe,” “people are going to want to live and work in the District of Columbia.”
Bowser may have only her words to eat when restaurants and small businesses flee the city’s borders for Virginia.