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Minneapolis’ minimum wage hikes shut down Whiskey Junction

In June I wrote an article titled ‘$15 minimum wage: Bad news from Seattle should give Minneapolis pause‘. In it, I explained that as the price of labor goes up, people will tend to buy less of it, ceteris paribus. This explains why the weight of empirical literature on the effects of minimum wages supports the theory and shows that they hurt the very people they are intended to help.

Unfortunately, the experience of Seattle did not give the Minneapolis City Council pause. They went ahead and passed legislation raising the city’s minimum wage to $15ph by 2020. This act of economically illiteracy is already claiming casualties.

Last call at Whiskey Junction

Yesterday, it was announced that Minneapolis live music venue, bar, and restaurant, Whiskey Junction, will close at the end of the year. As the bar’s owners for the last 12 years, Elizabeth Obregón and Tom O’Shea, explained on Facebook,

Unfortunately, after recent changes in the Minneapolis ordinances regarding minimum wages and primarily the lack of a tip credit provision, we feel now is the time to get out of the bar business. We fought for a voice to explain how minimum wage without a tip credit will be detrimental to the small bar and restaurant owners of Minneapolis but we were not listened to. Therefore its on to the next adventure!

A common response on social media was “If they can’t afford to pay a living wage they shouldn’t be open”. There are three things wrong with this statement.

First, unless the staff are dying then they must be getting paid a ‘living wage’. Indeed, all the ‘living wage’ is is a trendy renaming of ‘higher minimum wage’.

Second, nobody forced the staff to take this wage. They were not drafted by Whiskey Junction. Minnesota’s tightening labor market is starting to drive up wages and improve conditions as employers compete for increasingly scarce workers. If Whiskey Junction’s workers really found their pay intolerable they would have left. If Elizabeth Obregón and Tom O’Shea are willing to hire a worker at $9.50ph and that worker is willing to work at $9.50ph, why should the City Council step in and prevent them?

And third, Whiskey Junction’s workers have just gone from ‘non-living wage’ to no wage at all. How is that an improvement?

Its easy to say ‘Raise the wage’ when you’ve never had to pay the wage

As I wrote back in August, “It is very easy to stand in a legislature or go on TV and radio and demand that other people do this or that with their money”. Sen. Bernie Sanders says on his website

Millions of Americans are working for totally inadequate wages. We must ensure that no full-time worker lives in poverty. The current federal minimum wage is starvation pay and must become a living wage. We must increase it to $15 an hour over the next several years.

But it isn’t Sen. Sanders who will have to pay that $15. It is people like Elizabeth Obregón and Tom O’Shea. Indeed, for all his exhortations in favor of higher wages, I am unaware that Sen. Sanders has ever, in his entire life, created one single job paying these wages with his own money. It is the Elizabeth Obregóns and Tom O’Sheas of this world who must bear the burden of delivering on the politician’s diktats.

John Phelan is an economist at Center of the American Experiment. 

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