As it turns out, raising the minimum wage to $15 an hour has proven to be quite the disaster for a lot of business owners who have adopted this new pay scale, regardless if they were forced to do so by the government or not. Rep. Alexandria Ocasio-Cortez, one of the most prominent voices in Congress for raising the minimum wage, apparently has first-hand knowledge of just how dangerous such a policy can be.
On Friday, Ocasio-Cortez found herself back behind the bar in New York City. According to Vox, AOC served food and mixed drinks at a local restaurant in partnership with One Fair Wage, an organization that advocates for an increase to the federal minimum wage for tipped employees.
In an effort to show her support for the Raise The Wage Act, a bill that would double the federal minimum wage by 2024, Ocasio-Cortez returned to her roots. “All labor has dignity. And the way that we give labor dignity is by paying people the respect and the value that they are worth at minimum. We have to make one fair wage and we have to raise the national minimum wage to $15 an hour, nothing less,” said Ocasio-Cortez.
Now, it’s easy to see how a worker who depends on their tips might be ecstatic for this proposal, but once you realize that things would go south if business owners are forced to subsidize such a massive wage increase, you might have a change of heart. A lot of business owners work an unbelievable amount of hours a week just to pay their bills, so being forced to increase pay would force the business owners to find a way to increase their revenue.
Typically, increasing revenue involves raising the prices on goods and services. And when that happens, it means fewer customers. Fewer customers mean less revenue. In order to keep the wheels turning, it also means slashing jobs and overhead.
According to a report from the Washington Free Beacon, one of Ocasio-Cortez’s previous employers, the Coffee Shop, had to close down for good in October of 2018 because of a New York State mandate that was to go into effect this year. The mandate forced employers who had more than 11 employees to raise their minimum wage to $15 an hour.
Co-founder of the business, Charles Milite, used simple math to explain why he had to shut down his business. While speaking to Crains New York Business in April, Milite said: “I know it doesn’t sound like much — $2 an hour, But when you multiply it by 40 hours, by 130 people, it becomes a big number. It was going to increase our monthly payroll $46,000.”
This obviously means that forcing an increase to minimum wage can inevitably lead to financial disaster, which can lead to layoffs. According to the Employment Policies Institute, this has already happened throughout the United States, and if AOC manages to get the Raise the Wage Act passed, then it will only get worse.
On Friday, AOC said: “Any job that pays $2.13 an hour is not a job, it’s indentured servitude,” in reference to what some employers pay their tipped workers per hour. But AOC’s statement isn’t exactly the truth.
There are plenty of servers and bartenders who make several hundred dollars in a shift. Many of them use their cash to get themselves through college or to improve their lives. Serving can actually be a really great gig if you get into the right place. All we know is if AOC gets her way, small business owners will be the ones to suffer.