The San Diego City Council recently voted 8-0 to increase the minimum wage to $25 an hour over the next four years — a massive 45% hike over the current citywide $17.25 an hour rate — for tourism and hospitality employees at larger hotels, sports venues, SeaWorld, the San Diego Zoo and other event centers. In doing so, it ignored the negative consequences, as evidenced in numerous prior examples both within and outside California, which will harm workers and consumers alike.
San Diego apparently did not learn from California’s experience after the state increased the minimum wage for fast-food workers to $20 an hour in 2023. As a result, wage growth in the sector went from increasing faster than the rest of the country just prior to the law’s passage to a decline of approximately 3%, translating to a loss of about 18,000 jobs in less than two years. Menu prices also increased significantly and a number of restaurants closed. Many workers saw their hours decreased as employers tried to minimize costs and stay afloat. The Employment Policies Institute found that in the year after the law was implemented, fast-food workers saw hours reduced by up to 250 hours — roughly seven weeks — of work, costing them up to $4,000 in lost income.
As if it was not arbitrary enough for the government to mandate the price of labor, now it is picking certain industries on which to bestow this supposed bounty. But if raising the minimum wage to $25 an hour would actually help all workers, why be so miserly about it? Why not increase it to $100 an hour so they can really prosper? In fact, if we can manufacture wealth with the wave of a magic wand — or the stroke of a legislative pen — why not raise it to $1,000 an hour for all workers?
The consequences of such an action should be obvious. Business owners do not make nearly enough profits to be able to afford to pay people that much, and if they tried to compensate by raising prices, consumers would never be able or willing to pay that much. They would go out of business, workers would have no jobs at all and consumers would not be able to buy their goods or utilize their services. It would be both a practical and a moral outrage if a government was to inflict such an outcome on society.
Why, then, should we accept government mandates that wages (or any other prices) be any other amount above market rates voluntarily negotiated between an employer and a prospective worker? Any minimum wage or “living wage” above market rates will cause job losses, price increases and business closures, just as it would at $100 or $1,000 an hour. The difference is only a matter of degree.
This is why proponents of minimum wage hikes tend to speak in terms of businesses being able to “absorb” the wage mandates — and why a late revision to the San Diego measure ended up spreading the burden over a four-year phase-in period.
“Do not tell me that the sky will fall, that business can’t absorb it, and think that you’ve made your case simply by saying that,” Councilmember Sean Elo-Rivera, who has championed the minimum wage hike, blithely asserted in a recent interview with the Union-Tribune.
Such comments illustrate not only a stunning ignorance of basic economics but also a failure to acknowledge the fact that numerous other state and local minimum wage increases have all had the same negative results of job losses and price increases — and that the sky did, indeed, fall for the numerous businesses that were forced to close as a result of such policies. It is also a tacit admission that proponents know they are harming businesses by using the force of government to divert a portion of profits, which might otherwise be reinvested in growing the business, to labor costs. They simply don’t care. Like a parasite, the goal seems to be to walk a fine line to leech off of business owners without completely killing the host. (This also largely explains tax policy, particularly in high-tax states like California.)
But if it is wrong to impose a $1,000-an-hour minimum wage, how, then, is it practically or morally justified to only put some companies out of business, or to merely cause some people to lose their jobs, through a less draconian mandate?
If lawmakers really want to improve their constituents’ economic fortunes, they should start by repealing the myriad laws and regulations that kill businesses and drive up the cost of living. Repeating old mistakes and ignoring economic principles will only lead to more of the same.
Summers is a columnist, economist and public policy analyst, and a former editorial writer for the Orange County Register / Southern California News Group.