Catherine Pugh, the newly elected Democratic Mayor of Baltimore, has shocked many of her supporters by announcing that she will veto the $15 minimum wage hike recently passed by the city council. The announcement was an about-face for Pugh, who campaigned for the minimum wage increase during her successful 2016 mayoral campaign. In her press conference, Pugh explained the reason for her change of heart: that the raise in wages would hurt the city’s already fragile economy, adversely affect charities and non-profits in the city, and produce a $116 million dollar hit to the city’s budget.
Democrats and progressive leftist groups in support of the minimum wage hike in Maryland are “beyond disappointed” and vow to hold her accountable for her “broken campaign promises”. The Fight for $15, as it is known, came to the forefront in American politics thanks to Sen. Bernie Sanders’ (I-VT) support of the minimum wage hike during his 2016 presidential campaign. Riding the wave of populism, the 2016 election saw many states vote on raising their minimum wage, including Maryland, but the federal minimum wage remains below the magical $15 threshold.
The bill now goes back to the city council who very likely already have the 12 votes necessary to override the mayor’s veto, thus hastening down the path of collapse for Baltimore’s shaky economy.
It should be no surprise that minimum wage laws create massive unintended consequences, such as unemployment, rising consumer prices, and even business closures. This is shown by the overwhelming majority of labor economists that oppose minimum wage increases. Minimum wage hikes also hurt precisely those that they are supposed to help, particularly unskilled teenage workers and minorities. The reason for this is simple to understand. Imagine as an unskilled worker you make $7 per hour. This is because you provide $7 per hour of utility to your employer. Now say the government sets a $15 per hour mandatory minimum wage. What do you suspect will happen to that employee under the new wage law? If you said either (a) he’d be let go, or (b) the business will raise its prices to accommodate the wage hike, you are correct, as that’s what overwhelmingly happens. If you said (c) the business owner should be forced to pay the raise out of his greedy and evil “profits”, please read this until this paragraph makes sense to you.
As Thomas Sowell so eloquently puts it in his fantastic book Basic Economics:
“Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or escalation of a government-mandated minimum wage, because they lose their jobs or fail to find jobs when they enter the labor force. Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount—and, if it is not, that worker is unlikely to be employed.”
Good for Catherine Pugh for standing up for economic reality in the face of intense emotional pleading and other non-arguments. I only wish the same could be said for the hundreds of other huckster politicians buying low-income and minority votes with the promise of increased wages, before it’s too late.