Delaware Restaurateur

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PLAN SPELLS
DISASTER FOR
DELAWARE BUSINESSES
Originally appeared in the Delaware State News,
February 6th 2016
Delaware’s Senate recently voted to raise
the state minimum wage to $10.25, and
the motion now heads to the House for
approval. If passed, it’s unlikely the goal
posts will remain there for long. The bill’s
sponsor, Sen. Robert Marshall is leading
a drive to raise the state minimum wage
to $15 an hour—a more than an 80
percent increase over the current state
wage floor—and the Wilmington City
Council passed a resolution of support
for the $15 proposal.
A $15 minimum wage may be good
politics. But even left-of-center economists
are nervous about it as a matter of policy.
A starting wage of $15 an hour translates
to $30,000 a year, full-time job. Add in
the cost of employer-paid payroll taxes
and it adds up to an audacious demand
for entry-level work, one designed to raise
the bargaining stakes in the wage debate.
As one of the top organizers for the
Service Employees International Union
has admitted, this number was pulled
out of thin air. In his words, “$10 was
too low and $20 was too high, so we
landed at $15.”
Still, a handful of cities have charged
ahead with wage mandates at or near the
$15 figure. The early results have been
disastrous. In Oakland, San Francisco,
and Seattle, a number of businesses
have either closed or dramatically cut
back on available jobs.
In Los Angeles, where the $15
requirement hasn’t even begun phasing
in, businesses are already looking
to move beyond the city borders.
(Specific stories can be viewed at
)
The economic dynamics at play here
are clear. Businesses with narrow
profit margins (e.g. restaurants, small
retailers, or child care providers) or
organizations with no profit at all (e.g.
nonprofits) can’t simply absorb an 80-
plus percent increase in the minimum
wage. In some cases, they’re able to
raise prices and scale back staffing
levels to offset the cost; in other cases,
the only option is to close their doors or
move if it’s a feasible option.
This is why even economists who’ve
been supportive of a minimum wage in
the range of $10 an hour are opposed
to raising it to $15. This includes
alumni of both the Clinton and Obama
administrations, including University
of Maryland economist Katharine
Abraham and Georgetown University
economist Harry Holzer.
These aren’t isolated anecdotes: A recent
University of New Hampshire survey
of 166 labor economists nationwide
(60 percent of whom identified as
Democrats) found that nearly three-
quarters opposed a broad $15 mandate.
In Delaware, Sen. Marshall’s own
preferred economists wouldn’t likely
back his $15 plan. In a report released
by a low-wage task force chaired by
the senator, research from University
of Massachusetts-Amherst economist
Arin Dube was cited in support of the
questionable proposition that a higher
minimum wage won’t cause job loss. But
a paper released in 2014, and authored
by Dr. Dube, proposed a minimum wage
of closer to $10 an hour for Delaware.
According to a methodology developed
by the nonpartisan Congressional
Budget Office, the damage in Delaware
from $15 would be severe. At the $12
minimum wage level backed by Vice
President Biden, the CBO methodology
suggests that approximately 2,500 jobs
would be lost in Delaware–jobs held
mostly by less-skilled employees. At a
$15 wage floor, this damage would only
be compounded.
Michael Saltsman, Employment Policies Institute
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