The Real Minimum Wage Is Zero

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In an example of noxious Unintended Consequences, the City Council of Long Beach, CA adopted an ordinance in January requiring large grocery-store chains to pay employees an extra $4 an hour, calling it “Hero Pay.”

The city council’s intent was to reward workers for risks taken by doing their jobs amid the Covid-19 pandemic, explains William McGurn in the WSJ.

What Really Happened

In response to the ordinance, Kroger Co. announced it would close two Long Beach supermarkets. Once again, workers were sacrificed to greed. As local union leader John Grant told the Washington Post, “it’s reckless capitalism run amok.”

As one of the world’s largest retailers, Kroger makes an easy villain. But instead of blaming “reckless capitalism,” might the fault lie with the reckless politicians who passed this measure? Thanks to their intervention, instead of finding an extra $4 an hour in their paychecks, nearly 200 grocery workers will now have no paychecks at all unless they are transferred to another store or find another job. It’s but the latest illustration of economist Thomas Sowell’s dictum that whatever a government might set it at, “the real minimum wage is always zero.”

What happened to these workers is worth bearing in mind as Congress debates whether to raise the federal minimum wage. For though the Long Beach ordinance was called “hero pay” and meant to be temporary, it operated as a minimum-wage increase for the affected grocery workers.

And just as the Long Beach City Council passed it unanimously and without much thought that it could end up doing more harm to these workers than good, those now pressing Congress to include the $15-an-hour federal minimum wage in its Covid-19 relief package ask us to believe the costs would be nonexistent or minimal.

As the minimum wage “one-size-fits all” debate continues, Democrat senators Joe Manchin (W.VA) and Krysten Sinema (AZ), both of whom have doubts, could take down the whole relief package.

Sen. Manchin claims to be open to an increase in the federal minimum wage, but only to $11, which he feels it “responsible and reasonable.” “No doubt he appreciates that West Virginia would find $15 harder to absorb than businesses in, say, high-priced New York or Los Angeles,” continues Mr. McGurn.

In an interview with Politico, Sen. Sinema pushed the idea of the COVID spending bill to be confined to short-term relief. Sinema doesn’t want to see the minimum wage set via the budget reconciliation process.

That’s important because Democrats have no Senate votes to spare. Either Mr. Manchin or Ms. Sinema could take down the whole relief package if it includes the $15 minimum wage. Even Joe Biden, who campaigned on it, has said he’s not sure the minimum-wage hike will survive the Senate.

There are many ways businesses can absorb these costs: by raising prices on their consumers; by replacing employees with machines; or by reducing hours, which in some cases could mean that workers make more per hour but less each week.