AFL-CIO misses the point on #raisethewage story

By   /   April 17, 2014  /   No Comments

By Ryan Ekvall | Wisconsin Reporter

MADISON, Wis. — The Wisconsin chapter of the AFL-CIO, which is pushing for a national $15-an-hour minimum wage, got it all wrong tweeting out a Wall Street Journal story under the hashtag #RaisetheWage.

Instead of championing the left-wing argument for increasing the minimum wage, the tweet actually illustrates what happens when government increases the cost of labor.

aflcio

A Minneapolis-based pizza chain called Punch Neapolitan Pizza recently raised its starting wages from $7.50 an hour to $10.00 an hour, according to the Wall Street Journal story.

“We did it for old-fashioned capitalistic reasons. We wanted to beat the competition,” co-owner John Puckett told  the Journal. “We wanted to offer high quality service, and we needed to be north of the minimum wage to attract and keep the type of people we think our business needs.”

For Puckett, raising wages was a strategic decision to improve worker quality, thereby improving the quality of service to customers. Puckett predicts this strategy will increase sales.

Higher wages and higher quality workers at Punch Neapolitan will also necessarily eliminate job prospects in the chain for lesser-skilled employees. Those workers not hired at Punch Neapolitan are still able to go out and find beginner work at Pizza Hut or other pizza joints that offer work at less than $10 an hour.

Now, what do you suppose might happen if the federal government decides the hourly wage for those beginner jobs should start at $10.10, as President Obama has implored, rather than the current base of $7.25?

A higher minimum wage precludes those jobs. And the higher the minimum wage, the more difficult it is for low-skilled job seekers to find work, a pernicious side-effect worse than increased consumer prices or shuttered small businesses.

Punch Neapolitans’ operating profits have dropped by 20 percent since Puckett raised wages. Puckett said he doesn’t expect to recover those losses for several years. He said he’ll eventually get the income back in lower employee turnover, more rigorous quality standards enforcement and increased customer loyalty.

Time and the invisible hand of the market will tell, but if Puckett is wrong, only his business is affected. If government forced all employers to pay $10.10 an hour, the negative consequences would cost all of us.

Contact Ryan Ekvall at rekvall@watchdog.org, 608-257-1382 or follow him on Twitter @Nockian.

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Ryan Ekvall uncovers government waste, fraud and abuse for Wisconsin Reporter. His work has appeared at Reason, Fox News and Human Events.