Want to Hurt the Poor? Double Their Pay
Acton Institute Powerblog

Want to Hurt the Poor? Double Their Pay

fast-food-strikeWould you be in favor of a pay increase of 107 percent for your current job?

Most of us would be thrilled at having our pay more than double, and would readily support such a change. Imagine if all that was required was to vote for your industry to become unionized. Who wouldn’t support unionization if it resulted in a bigger paycheck?

But what if the change came with one caveat: If the pay increase were approved you’d not only lose your job, you’d no longer be qualified to work in the same industry. Would you still support the pay increase if it cost you your job?

That’s the choice a lot of food-service workers face—though few understand the true implications of their decision. Most fast-food workers going on strike for higher wages simply believe they are deserving of more money and aren’t aware of the basic economic factors that could cause them to become unemployable.

Let’s assume for the moment that doubling the price of labor would not speed up the process of businesses replacing fast-food workers with automated machines. Let’s say that the number of burger-flipping jobs taken over by robots is exactly zero. The change would still lead to massive unemployment for the poorest, low-skilled workers. This isn’t even a contentious claim: Almost all economists, whether on the right or left, agree that significant increases to the minimum wage or attempts to bring it in line with a “living wage” (e.g., $12-15 an hour) would lead to significant increases in unemployment.

Fast-food businesses are currently willing to hire low-skilled workers and serve as remedial-training vocational schools because it’s in their economic self-interest to do so. But raising the minimum wage takes away that incentive and will motivate businesses to replace many of their current employees with more highly skilled workers. As Anthony Davies explains, “the minimum wage prevents some of the least skilled, least educated, and least experienced workers from participating in the labor market because it discourages employers from taking a chance by hiring them. In other words, workers compete for jobs on the basis of education, skill, experience, and price. Of these factors, the only one on which the lesser-educated, lesser-skilled, and lesser-experienced worker can compete is price.” Double the hourly rate for fast-food workers and you double the incentive for employers to hire workers whose labor is worth $15 an hour.

You also increase the competition for fast-food jobs. While Buffy (and other teens from upper-middle class families) may not be willing to trade her job folding shirts at Abercrombie & Fitch for a cashier job at Burger King, many other people would jump at the chance to earn a higher wage. If you’re a worker currently earning $12 an hour doing construction work in the blazing sun, getting paid $15 an hour to make milkshakes in the air-conditioning sounds like a dream job.

The result of this increased competition combined with the unwillingness of businesses to hire low-skilled workers means that many of the poorest Americans will become unable to find a job at all.

So why does the Service Employees International Union (S.E.I.U.) support the raise? Because they care more about the union than they do the poor. What they care about is that the jobs be unionized. As long as there is some worker in the union job paying the union dues, they don’t really care who they are. It’s not that the union is evil—S.E.I.U. is just acting in its self-interest. Expanding into the fast-food sector increases the revenue and political power of the union. And hundreds of thousands of the poorest, low-skilled workers losing their jobs is regrettable, but a cost the union is willing to pay.

Let me be clear: I’m not anti-union; I’m just pro-poor folks. When the interests of worker associations clash with the interests of low-skilled workers, I’ll side with the latter every time. Those of us who truly care about the poor should oppose attempts to increase wage rates that price the low-skilled out of the job market. We should also explain to fast-food workers that while it may sound great to be promised a doubling of their pay, unionization can’t protect them from the effects of basic economic reality.

Joe Carter

Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).