Maine restaurant workers successfully lobby to reduce their minimum wage

The logic supporting government-mandated minimum wages just got stood on its head in the Great State of Maine.  As Caitlin Dewey reports for the Washington Post:

As the Maine House voted on a bill to reduce the minimum wage for tipped restaurant workers, Jason Buckwalter and a dozen fellow servers huddled in a back room listening to the vote call at the Bangor steakhouse where they work.

They all hoped to hear one thing: that state legislators had voted to lower their wages. Some cried with relief, Buckwalter said, when the final vote ended at 110 to 37 – overwhelmingly in their favor.

The legislators were voting on a minimum wage reduction because of an earlier referendum that sweepingly revised the state's minimum wage laws, increasing them over time, and that deleted a former provision that allowed restaurant employers to count tips as up to 50% of the minimum wage.  In other words, the restaurant could pay 50% of the minimum wage and pass the legal test because tips were assumed to cover the rest.

Removing that provision and increasing the base wage raised the labor cost for restaurants to levels that obviously would have cost jobs.  The workers themselves realized what the consequences would be, and thus lobbied to prevent the drastic job losses that would inevitably follow.  

[S]ervers actively campaigned to overturn the results of a November referendum raising servers' hourly wages from $3.75 in 2016 to $12 by 2024,  saying it would cause customers to tip less and actually reduce their take-home income.

This all took place before the release of a study that found that Seattle's minimum wage had seriously harmed low-wage workers there.

This incident illustrates that people who actually have to live with the regulations have a far deeper understanding of their consequences than do bureaucrats, legislators, or even voters.  Special interest groups, especially labor unions with contractual wages specified as "minimum wage + X, " can spin fantasies of helping hardworking poor people without raising taxes and win referenda when legislators and governors won't cooperate. 

But the transaction in which labor is exchanged for compensation actually can be very complex, so the meat cleaver approach of minimum wage regulation kills off valuable arrangements voluntarily agreed to.  Consider apprenticeship, in which the acquisition of skills is part of the compensation received.  The United States currently faces a labor force crisis, in which jobs go begging because there are no skilled workers to fill them.  Part of the problem is that organic approaches such as informal apprenticeships cannot be launched easily in the current environment of labor regulation.  A major source of Germany's industrial strength is its highly institutionalized apprenticeship programs.

Minimum wage laws are a perfect example of feel-good statism, in which the professed goal is noble, but the execution inevitably fails and makes things worse.  The state can no more repeal the law of supply and demand than it can the law of gravity.

But don't tell that to the Seattle City Council, which just commissioned a new study intended to get the answer it wants, from a scholar who has contended, in effect, that supply and demand don't really work at the bottom of the wage scale.  The wonderful thing about working with numbers is that by choosing baselines, time periods, and sample bias, you can find almost whatever you want.  As a graduate student who got a Ph.D. in sociology, I saw this clearly and was sickened by people openly proud of the ways in which they got to the conclusions they wanted for ideological reasons.  Nobel laureate Ronald Coase famously summed it up: "If you torture the data long enough, it will confess."

Hat tip: Michael Nadler

The logic supporting government-mandated minimum wages just got stood on its head in the Great State of Maine.  As Caitlin Dewey reports for the Washington Post:

As the Maine House voted on a bill to reduce the minimum wage for tipped restaurant workers, Jason Buckwalter and a dozen fellow servers huddled in a back room listening to the vote call at the Bangor steakhouse where they work.

They all hoped to hear one thing: that state legislators had voted to lower their wages. Some cried with relief, Buckwalter said, when the final vote ended at 110 to 37 – overwhelmingly in their favor.

The legislators were voting on a minimum wage reduction because of an earlier referendum that sweepingly revised the state's minimum wage laws, increasing them over time, and that deleted a former provision that allowed restaurant employers to count tips as up to 50% of the minimum wage.  In other words, the restaurant could pay 50% of the minimum wage and pass the legal test because tips were assumed to cover the rest.

Removing that provision and increasing the base wage raised the labor cost for restaurants to levels that obviously would have cost jobs.  The workers themselves realized what the consequences would be, and thus lobbied to prevent the drastic job losses that would inevitably follow.  

[S]ervers actively campaigned to overturn the results of a November referendum raising servers' hourly wages from $3.75 in 2016 to $12 by 2024,  saying it would cause customers to tip less and actually reduce their take-home income.

This all took place before the release of a study that found that Seattle's minimum wage had seriously harmed low-wage workers there.

This incident illustrates that people who actually have to live with the regulations have a far deeper understanding of their consequences than do bureaucrats, legislators, or even voters.  Special interest groups, especially labor unions with contractual wages specified as "minimum wage + X, " can spin fantasies of helping hardworking poor people without raising taxes and win referenda when legislators and governors won't cooperate. 

But the transaction in which labor is exchanged for compensation actually can be very complex, so the meat cleaver approach of minimum wage regulation kills off valuable arrangements voluntarily agreed to.  Consider apprenticeship, in which the acquisition of skills is part of the compensation received.  The United States currently faces a labor force crisis, in which jobs go begging because there are no skilled workers to fill them.  Part of the problem is that organic approaches such as informal apprenticeships cannot be launched easily in the current environment of labor regulation.  A major source of Germany's industrial strength is its highly institutionalized apprenticeship programs.

Minimum wage laws are a perfect example of feel-good statism, in which the professed goal is noble, but the execution inevitably fails and makes things worse.  The state can no more repeal the law of supply and demand than it can the law of gravity.

But don't tell that to the Seattle City Council, which just commissioned a new study intended to get the answer it wants, from a scholar who has contended, in effect, that supply and demand don't really work at the bottom of the wage scale.  The wonderful thing about working with numbers is that by choosing baselines, time periods, and sample bias, you can find almost whatever you want.  As a graduate student who got a Ph.D. in sociology, I saw this clearly and was sickened by people openly proud of the ways in which they got to the conclusions they wanted for ideological reasons.  Nobel laureate Ronald Coase famously summed it up: "If you torture the data long enough, it will confess."

Hat tip: Michael Nadler

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