This story is unavailable.

They did no such thing and if you are an Economics Editor, you know better, or you should. Because your Econ 101 textbook would have explained this to you. What they did was save these people’s jobs.

Minimum wage is a PRICE FLOOR. Price floors cause surpluses. They do not change the clearing price for a good. They render transactions for which the clearing price is below the floor uneconomical to make, and thus almost none of them happen. For example, take the sandwich that the lady whose example you cite might prepare: the Big Mac. A Big Mac carries a premium price — for McDonald’s — of $5, or thereabouts, depending upon store location. $5 is the price at which McDonald’s has calculated that people will buy enough of them to maximize its profit. It could charge $4, make a lower margin and achieve higher volume — but not enough volume to make up for the $1 per burger lost in margin. It could charge $6 per burger and achieve greater margin, but the volume lost would more than offset the rise in margin. So $5 is the clearing price. As you can see, it is dictated by the consumers and realized through their behavior — through the prices they pay, and are willing to pay.

If the City of St. Louis were to pass a local ordinance mandating that hamburgers be sold for no less than $10, the effect of that ordinance would not be that the same number of Big Macs would sell, but for $10 instead of $5. It would not be a windfall for Big Mac sales. Rather, almost no Big Macs would sell. People would still EAT — so, eating would not decline. But hamburger sales would probably decline, and to the extent that people continued to eat burgers, they would go to a pub, get the 1 pounder with blue cheese, freshly prepared, tell the waitress whether they want it well done or medium, and so on. They would buy a $10 burger. That would be devastating for McDonald’s franchises in St. Louis — assuming no immediate ability to improve the quality of the Big Mac.

If the Missouri State Legislature were to overturn that increase, that would save the McDonald’s franchises from that very devastation. It would not “prevent McDonald’s from realizing an extra $5 per Big Mac.” But your analysis seems to assume that it would.

What is a $10 burger and what is a $5 burger cannot be decided by the legislature. It is decided by the consumers. The legislature cannot change this judgment — only prevent it from taking effect in the market.

Similarly, the labor inputs that go to making the Big Mac are also dictated as a function of supply and demand, ultimately stemming from the consumers’ judgment. The function does not require much skill, and does not add much value — not as judged by God but as judged by the consumers — who happen to be the workers once the clock strikes 5PM.

Thus, the impact upon someone making $7/hour of a law mandating a price floor of $10/hour or $15/hour would be as devastating to the individual worker as the $10 burger would be to McDonald’s.

McDonald’s would still hire SOMEONE. But they would not pay $10 or $15 for labor that adds $7 of value, given that the store has to deal with the prices it receives from the consumers, and that those prices do not support a higher valuation. They would hire, instead of 10 people who could handle one task at a time (you’ve been inside a McDonald’s I’m sure), perhaps 7 people who could sometimes double-task (like in a Starbucks). They might invest in automation, like CVS did and like McDonald’s is starting to do, specifically in response to politically motivated but economically ignorant efforts to raise the price floor on wages. Any of these moves would be devastating for the individual making $7/hour, who can hope to make more only be developing the ability to produce more value in an hour, which would come through experience and/or through education, e.g., night classes (we’ve all been there), the tuition for which would be paid with wages, which cannot be earned if one is priced out of a job.

Now, in this line of work, there is usually no formal layoff, no firing. You walk into the back room every two weeks and you get your schedule — it’s handing on the wall. One day the next two weeks show that you have 6 hours, on Saturday night, instead of 36 hours during the week. You might be worth $10/hour Saturday night because it’s more crowded and nobody else wants to work at that time, leaving a smaller supply of workers. Eventually you just leave because six hours is not enough. If you ask the store owner the right questions, you could get an answer that seems to support the idea that the laws of economics deduced by J.B. Say and others simply don’t play out in the real world — while you get your 6 hours and some new person hired away from Starbucks gets 25 hours to replace your remaining 30, the store happens to presently employ MORE people. Total employment or unemployment is not impacted — you’re not laid off, you can’t collect unemployment, and this level of employment is at the extreme low margin of all employment, so changes to these individuals are not going to make a “material” difference in overall employment. So, you could say that “unemployment in total is not materially increased” and you might be able to say that “there was more hiring at the store.” But you’d be obfuscating, not revealing, the truth.

The truth is that eliminating the last rung of the economic ladder does not lift anyone up the ladder, but rather prevents people from climbing it.

This is not a matter of partisan politics or ideology or even philosophy. It is simple economics — and how you can write the opposite and refer to yourself as “economics editor” I have no idea.

You might as well write that you’re a “physics editor” and then challenge the law of gravity.

Show your support

Clapping shows how much you appreciated Patrick Trombly’s story.