Missouri To CUT Minimum Wage

by Rob Roper

Looks like the Show Me State was shown! Missouri is, according to news reports, lowering its state minimum wage from $10/hr. to $7.70. This follows evidence from places like Seattle, where they have embraced the $15 minimum wage movement, that such high minimums actually hurt the people they are meant to help.

A Seattle study showed that raising the minimum wage from $9.40 to $13 an hour (on the way to $15) actually cost low wage employees an average of $125 a month ($1500 a year) due mostly to corresponding cutbacks in hours. The Missouri story focused on the negative impact on small businesses. Restaurant owner Amer Hawatmeh’s experience with the $10 an hour wage “made it expensive to stay open. So he’s cut back from five to two days a week for lunch. His hamburgers are smaller, his entrees pricier and his customers scarcer.”

A recent Harvard Business School paper put some numbers behind this anecdote, determining that “a one dollar increase in the minimum wage leads to a 14 percent increase in the likelihood of exit [going out of business] for a 3.5-star restaurant (which is the median rating).” When restaurants go out of business, restaurant jobs – both higher and low wage — go away. This is an important lesson for a state with such a large tourist economy.

So, Missouri’s example shows there is hope for Vermont. It is possible for politicians to learn from mistakes made by other states in the “laboratory of democracy” and not repeat them. Or, they could put their ideology before evidence and plow ahead regardless. I guess we’ll find out next January.

Rob Roper is president of the Ethan Allen Institute.

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