Raise Minimum Wage and Workers Cut Hours to Keep Welfare

Reportedly, Seattle’s law to raise minimum wage is running into a conflict with the welfare state.

As Mark reported back in 2013, one attempt to propagandize for a higher minimum wage was to accuse large companies using unskilled labor of being “welfare queens.” McDonald’s and Walmart were smeared with this term because anyone who was trying to live on a single income as one of their employees would need government assistance to live. The idea was pushed that McDonald’s and Walmart are getting subsidized labor.

Mark replied to one economist pushing this message.

It is not only legal, it is exactly what the welfare state wanted and expected. It is sickening hypocrisy to favor the welfare state (which [Barry] Ritholz does) and pretend that such support does not empower employers to pay their employees less. It isn’t just McDonald’s and Walmart. It is every independent convenience store franchise owner. McDonald’s didn’t create this situation. Walmart didn’t dream up welfare entitlements and then lobby to get them passed as a long-term strategy to pay employees less. If you don’t want people to benefit from free stuff, then stop offering it to them.

Well, now we have more experimental data on the issue, since Seattle has raised the minimum wage. According to Fox News, “Seattle sees fallout from $15 minimum wage, as other cities follow suit.”

“Fallout” is another term for unintended consequences or unintended results.

Seattle’s $15 minimum wage law is supposed to lift workers out of poverty and move them off public assistance. But there may be a hitch in the plan.

Evidence is surfacing that some workers are asking their bosses for fewer hours as their wages rise – in a bid to keep overall income down so they don’t lose public subsidies for things like food, child care and rent.

Full Life Care, a home nursing nonprofit, told KIRO-TV in Seattle that several workers want to work less.

“If they cut down their hours to stay on those subsidies because the $15 per hour minimum wage didn’t actually help get them out of poverty, all you’ve done is put a burden on the business and given false hope to a lot of people,” said Jason Rantz, host of the Jason Rantz show on 97.3 KIRO-FM.

How common is this? I don’t know. But it doesn’t seem like many people have been enabled to get less assistance after the raising of the minimum wage.

The notion that employees are intentionally working less to preserve their welfare has been a hot topic on talk radio. While the claims are difficult to track, state stats indeed suggest few are moving off welfare programs under the new wage.

Despite a booming economy throughout western Washington, the state’s welfare caseload has dropped very little since the higher wage phase began in Seattle in April. In March 130,851 people were enrolled in the Basic Food program. In April, the caseload dropped to 130,376.

The bottom line is that the government is distorting the economy by interfering in the employer-employee relationship with both minimum wage laws and welfare payments. The government needs to let people negotiate their lives with free people so that wages and prices are set at the right balance point. Every time the government “helps” someone it creates more problems, which it then attempts to solve with more “help” that creates yet more problems.