Minimum wage supporters would be smart to think about the concept of karma, the Buddhist concept of moral causation – the idea that nothing happens to a person that he doesn’t deserve. In other words, we are architects of our own fate.
Borderlands Books has been selling new and used books in San Francisco for 18 years. A reader’s bookstore specializing in science fiction, it’s comfortable – the perfect place to spend a rainy San Francisco afternoon. It’s also a small business with bills to pay including rent, wages, electricity, and all the other costs of doing business. The store faces other economic challenges such as Amazon.com, Audiobooks.com, and other alternative means of obtaining and reading books.
The proverbial nail in the coffin, however, was San Francisco’s new minimum wage law. The bookstore announced this week in its blog that it will close its doors by March 31, despite last year being its best year ever.
Proposition J raised the minimum wage in San Francisco from $10.74 per hour last year to $11.05 beginning New Year’s Day, followed by another bump to $12.25 on May 1. The rate will continue to rise each year until it reaches $15.00 per hour in 2018. Facing a 14 percent wage increase between Christmas and Memorial Day alone was too much for the bookstore to bear. “Continuing to pay the higher wage without any corresponding increase in income will expend the store’s cash assets,” reported the store blog.
This should come as no surprise. A recent study found that states with higher minimum wages had higher unemployment. That’s basic economics. When the cost of something goes up, demand goes down. Raise the cost of labor by increasing the minimum wage and demand for labor goes down, meaning unemployment. And the laws of economics played out exactly as expected. San Francisco got exactly the result it deserved.
San Francisco is the most liberal city in the United States. Not surprisingly, the San Francisco Examiner endorsed Proposition J: “San Franciscans need a $15 minimum wage, and they need it now.” Borderlands Books certainly didn’t need it. It was profitable, serving the community, and employing residents of San Francisco. Come March 31, this will all come to a stop.
Proponents of higher minimum wages will likely just say, “Raise your prices.” (Not so easy in the book business. Book prices are set by publishers and clearly printed on books.) But when businesses do so, San Franciscans flush with post-Proposition J wages will be forced to spend more of those new wages on higher-priced goods and services. Who benefits?
President Obama, in his recent State of the Union address, called on Congress to raise the national minimum wage from $7.25 to $10.10 an hour, a nearly 40 percent increase. If there is any doubt how that will play out, just look at Borderlands Books. The delicious irony is a liberal city embracing a liberal concept and finding that things did not play out as they hoped – but exactly as economics predicted.
Architects of their own fate, getting just what they deserved.
Brian Joondeph, MD, MPS, a Denver-based physician, is an advocate of smaller, more efficient government. Twitter @retinaldoctor.