Georgia Workers: 2 Socialists: 0

Chalk up a major victory for some people who really need a break, metro Atlanta’s youngest, poorest and least educated workers!
Odds are they won’t appreciate the huge gift Georgia lawmakers have given them. They may even think those nasty politicians have done them wrong. But they’re mighty lucky anyway. The state legislature has wrapped up its session by approving House Bill 59. The bill bans local governments from back door maneuvers to set their own minimum wages, above the federal minimum wage.
Congratulations entry level job seekers!
Congratulations immigrants!
Congratulations kids hoping for a summer job!
Now the city of Atlanta WON’T be able to sabotage the job market for you, and you have a better chance of actually finding work, or keeping your job if you have one.
House Bill 59 never mentions Atlanta. It applies to all local governments in the state. But it cures Atlanta in particular of a disorder that could be deadly to jobs. It outlaws the city’s latest “living wage” ordinance, which functions as a local minimum wage law. (These days, socialists pushing for a higher minimum wage have taken to calling their objective a “living wage” because it sounds less like the meddlesome government mutilation of the marketplace it really is.) The Atlanta city council passed the ordinance in January. It gives preference to companies bidding for city services contracts if they pay their employees at least $10.50 an hour. That’s TWICE the federal minimum wage, and the employers would have to provide insurance for the workers too. The required wage is $12 an hour if they don’t.
Supporters of the ordinance say it would have been “voluntary,” because employers not paying the higher wages just don’t have to go after city contracts. Or, if they do, they can just opt to suffer the competitive disadvantage the ordinance would give them relative to any higher paying competitors.
Right.
As House Bill 59’s sponsor Representative Earl Ehrhart put it, “it’s about as voluntary as a brickbat.”
Perhaps the city needed a 6th grader to explain why this was a really bad idea for anyone actually concerned with the welfare of workers. I think it was in 6th grade where I learned about the law of supply and demand.
You remember: the price of a commodity is a determined by how much of the commodity there is and how much demand there is for that commodity in the marketplace. If demand goes up and supply stays the same, prices go up. If the supply goes up and demand stays the same, prices go down. Simple. But if you screw around with prices by interfering with the market and imposing artificial price controls you can create a shortage of the commodity by setting prices too low, or create a surplus by setting prices too high.
And if the commodity is labor, a “surplus” of workers relative to the number of jobs… is a rise in unemployment.
A bigger paycheck would indeed be nice… for those who continue to get paychecks!
But artificially high wages for the least senior, least skilled, sometimes youngest and poorest employees would strain many employers to the point that they decide to do without a few of those people. Those workers would end up priced out of their jobs and getting no paycheck at all. Ehrhart put it simply. “People would rather have a job at $8 an hour than no job at $12.50 per hour.”
Sandra Robertson with the Atlanta Living Wage Coalition says “This is not a policy that is going to cause the sky to fall – that, in fact, it will lift the sky for many, many people.”
But rather than utopian pronouncements from activists who’ve never run a business in their lives, let’s hear from those who’d actually be dealing with the consequences of a “living wage” ordinance personally. Terrance Harps runs Global Concessions, which has some of the food concessions at Hartsfield Jackson Airport. If his business had to follow the ordinance, he predicts he’d have to cut back his work force 30 to 40 percent.
30 to 40 percent of the jobs lost!
And this is “lifting the sky” for people?
Harps gives the “living wage” plan a more appropriate title. “This is largely an unemployment plan” he told the Atlanta City Council back when it was debating the idea. Not that anyone listened at the time.
Rick Magurno at AirTran airways says his low cost business model depends on keeping labor expenses under control and a higher minimum wage would take away that control right at a time when the whole airline industry is in deep trouble. If AirTran had to follow the “living wage” ordinance, he told the council, AirTran would probably just terminate altogether its part time employee program in Atlanta.
Poof!
More jobs gone.
If that’s all just too hypothetical, perhaps we should look at where attempts have actually been made to artificially jack up wages beyond national standards. Look around the country and you’ll find that of the seven states with the highest unemployment rates, five have state minimum wage standards, “living wages,” that are above federal minimum wage.
Coincidence?
Consider Oregon, which has been repeatedly crippling its labor market with increases in its state minimum wage since 1997. The wage was raised again in 1998 and again in 1999. Each time, the state’s rate of job growth stagnated.
This is not how an economy lifts its most needy into the ranks of the employed.
The desire to improve the lives of Atlanta’s lowest income workers sounds wonderful. In the worlds of community activism and abstract academia the notion of bullying businesses into paying higher salaries may sound like a viable way to do it. But “we don’t compete in an academic textbook or in someone else’s economic model,” as Magurno puts it. “We compete in the marketplace.” And the marketplace doesn’t forgive violations of sound competitive business principles.
In the real world marketplace, bad decisions don’t happen in a vacuum. A scheme to force up the salaries of the lowest paid employees wouldn’t end with them, and neither would the cost. If businesses had to pay more to their entry level workers, then they’d have to raise the salaries of more senior people too, as well as supervisors, and on up the chain of command. That means still more cost for the company and more pressure to let people go.
It would also bring more pressure for the company to raise prices to its customers. Of course, in the case of those city service contracts, the customers would be… THE TAXPAYERS!
Meanwhile, other businesses and individuals that buy from those companies would see their costs go up too. So up go their prices on top of their taxes. Before long, everybody’s cost of living has gone up to the point that those lower income families we were trying to help in the first place are even worse off than they were before, because now many of them are unemployed in an economy that’s been crippled by the government’s harebrained crusade to extort their employers into overpaying them.
R.I.P. Atlanta “living wage” ordinance, and good riddance.
Talk about dodging a bullet.
Instead, despite the efforts of some well meaning but misguided politicians, Atlanta is now obliged to remain a business-friendly city where lower income workers can actually find jobs, where businesses can compete and will actually want to create jobs, and where prosperity remains a possible dream.

This tale of disaster averted should carry one cautionary postscript.
House Bill 59 was actually the SECOND measure taken by the state legislature to head off a higher minimum wage in Atlanta. When the city was considering the idea a year ago, the state preempted it, passed a bill banning mandatory minimum wage increases by local governments. This latest “living wage” ordinance in Atlanta was another attempt to set up its own minimum wage, this time tap dancing around the state's ban by creating an ostensibly voluntary higher minimum wage. Thankfully that tapdance has gotten the hook.
Nonetheless, it might be prudent to keep a close eye on Atlanta’s wage activists and the city government to see what they try next.
April 9, 2005