One week after a slew of protests and rallies at Walmart stores, organized by anti-Walmart groups seeking to disrupt the massive retailer’s Black Friday business, protesters are now directing their attention at fast food chains and organizing to call for a $15 working wage.
Fast food employees joined professional protesters today in rallies sponsored by the SEIU, a major union, to demand a hike in wages for fast-food employees. Demonstrations and pickets ensued as strikers attempted to argue that they cannot survive on the federally mandated minimum wage of $7.70. Organizers also contend that an increase in basic wages at fast food chains would shave some money off the federal deficit because fast food employees often rely on public assistance. Similar protests occurred earlier this summer. Reason observed that in New York, only .1 percent of the city’s 57,000 fast food employees participated in protests, and that the majority of protests were comprised of professional organizers.
$15 an hour is an ambitious goal considering that most prospective minimum wage legislation calls for an increase to $10 an hour, though it’s not quite as ambitious as Senator Elizabeth Warren’s calls for a $22 minimum wage. Fast food chains on average spend one-third of their costs on labor, so it’s not likely that they’ll accede to demands. A White Castle executive addressed the protests, commenting that “[t]o more than double the federally mandated starting wage wouldn’t be bad for White Castle, it would be absolutely catastrophic.”
Organizers for higher minimum wages may have the support of politicians, but they face opposition from economists. President Obama recently addressed the plight of fast food workers in a speech to the Center for American Progress, defending mandated wage increases: “We all know the arguments that have been used against a higher minimum wage. Some say it actually hurts low-wage workers — businesses will be less likely to hire them. But there’s no solid evidence that a higher minimum wage costs jobs.” The Washington Post gave the president’s comments two Pinocchios, citing economists—including noxious liberal Paul Krugman—who agree that minimum wages have generally negative externalities.
Because wages are not economically different from prices, the effect of minimum wage increases is comparable to that of rent or price controls, which spur artificial scarcity. Increased wages could mean that fast food compensates by raising prices, increasing the costs of living for people who rely on the low-cost guarantee of fast food. Economist and TAS contributor Thomas Sowell takes umbrage with minimum wage laws, arguing that they are especially harmful to young people and minorities.
Other dangers of arbitrarily raised minimum wages are losses of jobs to automation, reduced hours, and disappearing entry-level jobs. Fast food franchises already rely extensively on automation, and an increase in the cost of hiring humans could easily spur additional reliance on machines. “A fry-cook machine doesn’t need health insurance,” observed Thomas G. Donlan in a Barron’s editorial. “Even burger-flipping, the archetypal service job so often treated with contempt, may become obsolete. In the words of the great economist Joni Mitchell, ‘You don’t know what you’ve got ’til it’s gone’.”
The additional costs associated with employees, such as health insurance under Obamacare’s mandates, may make hiring especially prohibitive when compounded by artificially high wages. Cutting hours and shifting employees from full- to part-time is another cost savings which fast food restaurants were already enacting due to Obamacare, and those policies would certainly escalate if strikers’ demands were met.
Increased wages would require employers to become much more selective in their hiring processes. If you’re required to pay $15 for an entry-level job, you can’t afford to take just anybody; employers would be more discerning with applicants and choose the most productive and skilled laborers. It wouldn’t be absurd to see McDonalds or Burger King require college degrees for people aspiring to make hamburgers. What would increased selectivity mean for the many unskilled laborers who rely on the promise of readily available employment at fast food restaurants around the country?