To insulate Minneapolis from the effects of bad policy, $15 activists need to hobble neighboring areas too

After the passing of the harmful $15 minimum wage law in Minneapolis, activists now have St Paul’s labor market in their sights. And they have to. As the Post Bulletin reported in January,

However, at a separate public comment meeting Wednesday, Dennis Curran, owner of a Nicollet Avenue restaurant popular with seniors, said he’d have to raise his menu prices 25 percent.

“The last time we had a minimum wage [increase], this elderly woman came in and she was in tears and she said, ‘Dennis, I’m not going to be able to eat here anymore,’ because I had to raise the price,” Curran said, adding, “please consider the senior citizens. Don’t leave them out.”

Steve Vranicar, who manages a Kowalski’s grocery store in far south Minneapolis, said higher city wages will mean higher prices, and that’ll send customers over the border to Bloomington, Richfield and other suburbs that will have a competitive advantage.

Minneapolis’ $15 minimum wage will be bad for low paid workers in Minneapolis. But, by exiling jobs to neighboring areas, it will be very good for them. To stem this exodus of employment, the $15 activists must now try to similarly cripple the low wage labor market in places like Bloomington and Richfield.

St Paul, I’m comin’ to get you

First in their sights is St Paul. One activist recently told his story to the Twin Cities Daily Planet

Samuel Callahan is a single father raising his 14-year-old daughter, the youngest of his seven children. The father-daughter pair share a one-bedroom apartment in North Minneapolis. It’s cramped quarters, and yet the small family still does not get to spend enough time together. Callahan has been working at a Taco Bell for the past four years, but in 2016 he also started picking up shifts at a McDonald’s in order to make ends meet. In total, Callahan works 17 hours a day, six days per week. He has never missed a day of work, often working through weekends and some holidays. When his daughter, a track and field athlete, comes home from school, Callahan is just starting his second shift. He has never been able to attend her track meets.

“[My daughter] understands, I’ve got to work. But I want her to be able to have it better. I don’t want her to struggle the way I have,” Callahan said.

For all Callahan’s hard work, he only makes $10 per hour. His take-home pay is just enough to make rent and some of the other basics he and his daughter need, but leaves no margin for savings or an emergency. As Callahan puts it, his kind of work doesn’t really make a living.

“I’ve always worked, all my life,” Callahan said. “But it’s hard. You have just enough to make rent, and then you take more hours and overtime just to have a little money in your pocket. My colleagues, single mothers, they’ve got to afford daycare for their little ones too. It all means spending less time together, spending less time taking care of yourself.”

Production, not effort, is what counts

“For all Callahan’s hard work, he only makes $10 per hour.” There is the Daily Planet’s correspondent falling for the old economic fallacy that remuneration is or should be a function of effort. As I’ve written recently, it isn’t. It is a function of production. If, for all his efforts, Mr Callahan doesn’t add more than $10 an hour to the revenues of Taco Bell or McDonald’s, he will not be paid more than $10 an hour. This is why jobs such as these have traditionally been done by younger workers just entering the labor force who have not yet acquired the skills to earn more money, not by middle aged men attempting to support a family.

The real minimum wage is zero. Raising the price of labor makes employers buy less of it. They may purchase machines instead. Either way, some workers will find their wages going from $10, not to $15, but to $0 as they lose their jobs. It remains the case that if we want to see higher wages we need higher productivity.

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