The Demand for Higher Wages Won’t Help the Poor

In the window of just about every store I walk by, “help wanted” signs signal a kind of quiet desperation on the part of business owners. As most establishments have been given at least some kind of permission to reopen after a devastating year of closures, employers are facing a new problem: workers don’t want to work. No doubt, this is partially due to paranoia over the safety of returning to the office (although as the vaccine rollout continues, one would expect these fears to diminish). But more importantly, it’s because many workers can now get more money by remaining jobless and relying on government assistance.

Some people are rather gleeful about this state of affairs, perceiving the labor shortage as the chickens justly coming home to roost for millionaires and billionaires who have overworked and underpaid their employees for too long. Now, they claim, businesses will be forced to pay a “living wage,” whatever that may mean. I’ve seen calls for wages as high as $30 an hour for basic service sector jobs all in the name of justice for embattled workers, and if that means that Jeff Bezos and his ilk take a hit to their profits, so much the better.

Compassion for the poor and underprivileged is commendable, and something I hope we all share, and the stereotype that conservatives and libertarians just don’t care about the underprivileged is a pretty unfair one. We all want to help those who need it, but where we differ is in which means will be most effective at achieving those ends.

Those calling for higher wages have good intentions, but they go amiss in making one big (and erroneous) assumption about how business and the economy actually work.

There is a very popular idea that people who run businesses are all fabulously wealthy and can afford to pay whatever their employees ask; the only thing that prevents them from doing so is pure greed and selfishness. Of course, this is not the case. Many businesses have very narrow profit margins, such that even a small increase in payroll costs would make them unprofitable. Furthermore, many owners of small businesses or franchises are aspiring entrepreneurs risking their meager savings to build a better life for themselves and their families. Yes, the owners of huge, multinational corporations can probably afford to pay more, but it’s unlikely that the immigrant running the local corner store or restaurant has the same luxury.

The mistakes of this assumption are clearly illustrated in the new Free the People documentary All We Have, which profiles the struggles of Fred and Amber Urban to keep their family business in Brooklyn, NY afloat amid an onslaught of government restrictions related to the COVID-19 pandemic. Fred and Amber explain how mandated closures and capacity restrictions have forced them to reduce their staff, cut back hours, and stop featuring live music in their restaurant. Meanwhile, national chain restaurants are getting the first crack at government loans and bailouts while independent businesses are left to languish on their own. Barely hanging on as it is, suddenly doubling their payroll expenses would certainly sink them, and it’s unclear how that would be good for anybody.

Indeed, it’s amazing that anyone thinks saddling small businesses with higher labors costs is going to hurt the billionaires they so revile. I’m sure the 1% would welcome the crippling of their competition with open arms. When only the rich can afford employees, only the rich will reap the profits that come from owning a business. So much for the middle class and social mobility.

I often hear the retort that those who can’t afford to pay their employees don’t deserve to have businesses in the first place. That’s easy enough to say, but the consequence of such an attitude is to put entrepreneurship out of reach to all but an elite few. We should celebrate and encourage the possibility for the average American to start a business without having to accumulate huge amounts of capital first, but instead we do everything we can to slap them down and maintain the privileged oligopolies of the wealthy and well-connected.

Looking further down the stream of cause and effect, the consequence of less competition and higher labor costs is not hard to see: prices will go up as well.

It’s naïve in the extreme to assume that once Wal-Mart loses its local competitors and is forced to pay more for its workers, it will not adjust prices upwards to compensate. And here again, it is not the billionaire class who bear the burden of these increases. Wages that only the rich can afford to give and prices that only the rich can afford to pay are hardly the salvation the working class is looking for—exactly the opposite.

In short, you can’t have it both ways. If you hate Jeff Bezos for his wealth, it makes zero sense to advocate for policies that will consolidate his market share, drive his competitors out of business, and make it harder for customers to afford his products, but that’s exactly what the American left is doing. Instead, those of us who truly want to help workers should listen to the stories of people like Fred and Amber, struggling employers who love their employees like a family, and try to take care of them in spite of all the government is doing to drive them into the ground. When labor regulations prevent small businesses from being able to compete, then we truly will witness the corporate hellscape that the left so fears.

Watch the full All We Have film telling Fred and Amber’s story. You can also view the official trailer here.

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