Bluegrass Beacon: Jobless in Seattle, naïve in Lexington

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With the wondrous Triple Crown win by American Pharaoh, what are the chances that the hardest achievement in any sport will be repeated again next year as it was when Seattle Slew and Affirmed won back-to-back crowns in 1977 and 1978?Probably better than the chance that the freight train being driven – and ridden – by populist-posturing, political-pandering politicians and their sheep-like followers to force business owners to pay an increased minimum wage can be stopped.

Restaurant owners get smacked especially hard by such poorly thought-out policies.

Eateries form a highly competitive industry operating on a very thin-and-crispy profit margin of 4 percent or less – something about which the Keynesian ideologues pushing Lexington-Fayette Urban County Council member Jennifer Mossotti’s proposal to raise the minimum wage in Kentucky’s second-largest city to $10.10 seem clueless.

Mossotti brushed aside concerns expressed at a recent Lexington Forum debate that raising the minimum wage would adversely affect business – which puts her 5 ½ lengths ahead of the field in a contest for the Politicians’ Triple Crown of Naïvety.

In fact, for a council member pushing a measure likely to cause economic harm to her constituents who also happen to be business owners that hire students, low-skilled refugees or retirees and workers themselves who depend on the extra income of a second or part-time job, Mossotti seems way in over her head – especially when it comes to the consequences of such policies.

In fact, the longer the Forum discussion went, the more naïve Mossotti appeared about the impact of her proposal on the very people she claims it will help.

After all, even some of the most ardent supporters of such government-mandated policies admit that businesses must be given time to prepare for such an increase – as evidenced by the fact that cities that have raised their minimum wage, including Louisville, often do so in steps over a period of many years.

This, of course, is in itself a blatant admission of what economically sound policymakers have always known: Increasing labor costs, which, on average, comprise 36 percent of restaurants’ earnings, always offers a detrimental effect for some involved – most often those very people whom Mossotti intends to help with such an unsophisticated policy.

This is not to question Mossotti’s intentions. It’s about the very real consequences of government trying to tell business owners how to run their operations and how much to pay their employees.

It doesn’t work.

Just ask Devin Jeran, who was jubilant about the raise he received when Seattle’s mandated that Ritu Shah Burnham, owner of Z Pizza – his employer – pay him $11 an hour beginning April 1 and $15 by 2017.Imagine how he felt, though, when Burnham informed him that she was going out of business in August, because, despite cutting hours, raising prices, laying off one of her 12-employee staff and not even taking a paycheck herself, she simply couldn’t afford to keep the pizza parlor open.

Devin wondered aloud to a local reporter about what happened to promises made when politicians, bureaucrats and other Keynesians assured him that forcing small businesses to pay employees more than they could afford to would make life better for workers like him.

Some collectivists who spoke at a recent Lexington council hearing on Mossotti’s proposal suggested that Seattle folks be invited to come and share about their experiences with the city’s minimum-wage hikes.

I couldn’t agree more!

Devin could race here and tell the Lexington council what he told that reporter: “People like me are finding themselves in a tougher situation than ever.”

He’d have plenty of time to do so now that he’s jobless in Seattle.

Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.bipps.org.