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In Politics, Every Silver Lining Has A Cloud

Many of the least-affluent residents of Washington, D.C., will soon have a chance to shop at a local Wal-Mart, and some will get jobs at the giant retailer. This is, of course, good news.

But in politics, every silver lining must come with a cloud. The cloud over the nation’s capital is a prospective hike in the city’s minimum wage, which, like all such hikes, will hurt some of those same worse-off residents by taking away the chance to get any job at all.

This give-a-little, take-a-little dance comes courtesy of the city’s elite and their labor union allies, who tried to keep Wal-Mart out of the district unless it was prepared to pay at least $12.50 an hour to all workers, regardless of skill level or full- or part-time status. Not that this would have stopped the elite from shopping at Wal-Mart if they wished, because Wal-Mart stores in nearby Maryland and Virginia are available to anyone who can reach them. Affluent Washingtonians usually have cars that enable suburban shopping; poor folks often do not.

Further, affluent Washingtonians never need to work for minimum wage. Their children can consider taking unpaid internships that build resumes and connections, smoothing their passage into the next generation of affluence. Young adults and teens who come from poor families can’t afford to work for free. Even part-time jobs at minimum wage can make a big difference for poor youth, putting them on the first rung of the career ladder.

So it was good news when Washington’s mayor vetoed the bill that aimed at Wal-Mart, and it was even better news when, last week, the D.C. council failed to override the mayoral veto.

The political price to be paid for defeating this selfish legislation (which was aimed at protecting unionized jobs at the grocers that sorely wanted to keep Wal-Mart at bay) is expected to be a further increase in the district’s legislated minimum wage. That will result in a level playing field, in that it will hurt all businesses and prospective workers more equally than the anti-Wal-Mart legislation would have. But that’s about the only good thing you can say for it.

Under a higher minimum wage, it will not only be illegal for employers to buy workers’ labor at a lower price; it will also be illegal for workers to sell at a lower price. Like all price floors, this agenda protects high-priced vendors (think older, unionized, experienced and full-time “vendors” of labor) at the expense of low-priced vendors (think younger, non-union, inexperienced, part-time teenagers and other workers) in the labor market.

The D.C. unemployment rate in July was a painful 9 percent, nearly two percentage points higher than the national rate. Worse, the unemployment rate for youths 16 to 19 in D.C. was 34 percent as of last year. For those aged 20 to 24, a demographic that is more dependent on full-time work than teenagers, the rate was 13.7 percent. A higher minimum wage will make it harder than ever for those people to get their start in the labor market.

Backers of the higher minimum will offer the usual red herrings about the impossibility of supporting a family on a minimum wage job. That’s true, but relevant only in a Father Knows Best world, where every job is held by a full-time wage-earning breadwinner whose partner is presumably home packing lunches for the kids. That’s not the world in which we live. Someone who needs to command higher wages - and can - does not take a minimum wage job. Only someone who can’t get paid more chooses to work for less. The point of a minimum wage is to take away that choice, and the labor competition that comes with it. When this happens, most such jobs do not go to workers at higher wages; they just go away.

It is too bad D.C.’s young people will pay the political price for their neighbors to be able to shop at a local Wal-Mart. It’s a good trade if a trade had to be made, which it apparently does in the world of Washington politics. But it’s a bad deal for those kids.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s most recent book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book, Looking Ahead: Life, Family, Wealth and Business After 55.

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