A new \”Hero Pay\” mandate in Long Beach, California has inadvertently cost some frontline grocery workers their jobs.
\”Ralphs and Food 4 Less, both of the parent company Kroger, announced Monday they're closing 25% of their stores in Long Beach after the city council passed an ordinance requiring companies with more than 300 employees nationwide to pay for employees an extra $4 per hour,\” local news outlet Fox 11 reports. Two stores in the region will be shut down.
Is this any way to treat heroes?
A company spokesperson directly cited the city council's ordinance mandating higher wages as the reason they are closing down.
The Real Victims
“The irreparable harm that will come to employees and local citizens like a direct result of the City of Long Beach's make an effort to pick winners and losers, is deeply unfortunate,” the spokesperson said. “We are truly saddened that our associates and customers will ultimately be the real victims of the city council's actions.”
The ordinance was passed with the stated intention of rewarding hard-working supermarket employees who have kept a vital service running throughout the COVID-19 pandemic. Long Beach Mayor Robert Garcia was a key proponent of the measure and signed it into law. He argues it is justified because grocery store workers \”have been in the frontlines of this pandemic and deserve this support.\”
Similarly, Garcia along with other supporters of the mandated wage hike argue that companies are just being selfish by closing down instead of paying their workers more. They indicate the fact that Kroger has seen high amounts of profit this year.
In truth, whether the company is being selfish and whether it's really flush with cash are both beside the point. This mandatory wage hike \”honoring heroes\” was passed by politicians eager to spend other people's money and claim the credit. But like any minimum wage law, it was always going to have the unintended results of eliminating some jobs altogether.
The minimum wage in Long Beach is already $14 per hour for employers with 26 or more employees. A $4 increase would therefore be $18 an hour, a nearly 30 percent raise for every employee. This amounts to a massive spike in a grocery store's labor costs, that are already one of the biggest expenses a company usually faces.
Whether do-good politicians feel workers \”deserve it\” or not, the reality is that some grocery store employees don't provide labor that is worth $18 an hour, and some stores cannot afford to pay such an artificially high price. The basic laws of supply and demand tell us what comes next: the government's supposed benevolence will leave a significant number of workers unemployed.
This specific instance of wage mandates backfiring is just one example of a much broader trend. On the national level, the \”Fight for $15\” movement demanding a $15 federal minimum wage ostensibly seeks to assist workers. In reality, the nonpartisan Congressional Budget Office projects this policy would eliminate 1.3 to 3.7 million jobs. An abundance of economic research similarly implies that minimum wage hikes cause unemployment.
The Moral from the Story
The moral of the story is clear.
Sweeping government price controls and labor market interventions will invariably have vast unintended consequences, regardless of how noble the stated intentions are or how sympathetic the intended beneficiary might be. Indeed, unintended consequences are a natural feature of big government programs.
\”Every human action has both intended and unintended consequences,\” economist Antony Davies and political scientist James Harrigan explain. \”Human beings react to every rule, regulation, and order governments impose, and their reactions result in outcomes that can be quite different than the outcomes lawmakers intended.\” The more complex the underlying situation and also the more sweeping the rule or regulation, the more pronounced the unintended consequences will be.
Long Beach lawmakers may truly have hoped to help front-line workers by mandating higher \”Hero Pay\” under the law. But their na