Cities are starting to see the harsh reality of high minimum wage laws

By ERIN SHANNON  | 
POLICY NOTES
|
Dec 5, 2017

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Key Findings:

  1. Good intentions can’t overcome the basic laws of economics; a socialist pizza shop in Boston dedicated to paying “fair wages” is closing after just two years in business.
     
  2. The problem is that the social enterprise model was not turning a profit.
     
  3. Simply hiking prices doesn’t work either; there is a limit as to how much consumers will pay for a slice of pie.
     
  4. New York City is seeing the cruel effects of their $15 minimum wage law for fast-food workers that took effect in 2016.  Employment growth at fast-food establishments has been cut in half over the past year, and is now two-thirds below its 2011 rate.
     
  5. Employers are simply replacing jobs with automation to save on labor costs.
     
  6. A U.W. study also found the higher wage cost Seattle 5,000 lost jobs, meaning less work opportunity for those who need it most.
     
  7. The losers are the low-skill, usually young, workers who once had easy access to entry-level jobs.
     

Introduction

Proving once again that good intentions can’t overcome the basic laws of economics, a socialist pizza shop in Boston dedicated to paying “fair wages” is closing after just two years in business.

Billed as “pizza with purpose,” the non-profit behind the Dudley Dough pizza shop said it “attempted to put social enterprise model into action.”  The problem is that the social enterprise model was not turning a profit and the non-profit could not continue to subsidize the project.

Meanwhile, three area restaurants that opened the same year as the pizza shop are still open.  It turns out paying workers an unreasonably high wage for making pizza doesn’t pencil out.  

Simply hiking prices doesn’t work either; there is a limit as to how much consumers will pay for a slice of pie, even if that slice is supporting the so-called “fair wages” of the workers who make it.

This is a lesson in basic economic principles many policy makers and socialists have missed in their Econ 101 classes.

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