What Are Lawmakers Thinking With These Minimum Wage Hikes?

“Fight for $15” is the rallying cry for raising the minimum wage in many U.S. cities. In mid May the Los Angeles City Council voted to raise the city’s minimum wage from $9 to $15 an hour by the year 2020.

Emeryville, California, a week earlier in May boosted the minimum wage there to $16 an hour.

This past December Chicago raised its minimum wage from $8.25 an hour to $10 an hour this year and to $13 an hour by 2019. Other major U.S. cities are following suit. As far as we can tell, more than 20 states are raising the minimum wage above the federally mandated $7.25 an hour, some significantly higher.

OK, my question: Do you truly believe that lawmakers think they can lift folks out of poverty by passing laws that force employers to pay their lowest skilled workers $1 or more per hour? Who in their right mind would think that boosting the minimum wage in Emeryville, California, which is in the San Francisco Bay Area (where the median price of a single-family house is $300,000), will make any significant dent in its poverty rate, which is smidge less than 10 percent?

The tightening labor market is putting pressure enough on employers to pay more for hourly help as evidenced by Wal-Mart’s announcement this past February that it will pay workers at least $10 an hour next year.

That’s the free market at work. Hey, remember back to Econ 101 when that bored graduate assistant walked everybody through the law of supply and demand?

So the obvious question becomes: What does raising the minimum wage even as the labor market tightens mean for the landscape/lawn services industry?

It means industry employers will have to pay more for hourly employees even though the industry in most markets, but especially in growing markets, already pays a premium for reliable hourly employees.

Raising the minimum wage is controversial and especially so when the economy is wobbly. Department of Labor statistics indicate that a 10 percent raise in the minimum wage leads to more than 5 percent fewer workers from low-income demographics getting jobs.

My guess is that that’s just about the way it will play out in the high-volume, low-margin landscape services industry. Smart owners will continue to mechanize and find ways to get more done with fewer workers.