Priced Out: An Unsustainable Minimum Wage Proposal

On Jan. 1, our state closed out the year having lost a net 2,000 jobs–regaining only seven of every 10 jobs lost during the recession–and with economic growth at less than 1%.
Also on the first day of the new year, the state’s minimum wage ratcheted up to $10.10 per hour, one of the highest in the country.
Before the month was out, a Capitol press conference was held to announce, with great fanfare, legislation increasing, in increments, that wage to $15 over the next six years.
In robust economic times with strong job growth, increases in the state’s starting wage have been fairly well received.
But with our current economy still struggling to get on its own feet, an ill-timed government-mandated minimum wage hike will only undermine entry-level jobs.
While industries that pay more than $15 an hour, such as manufacturing and financial services, saw modest job gains last year, low-paying service jobs ended up as net losers.
Why?

Well, businesses are not waiting for legislation to drive up labor costs, rather in this time of cheap capital and abundant credit, they are automating like mad.
About 47% have implemented new automation recently across the state.
Think about it: Have you noticed more self-service checkout lines in the grocery store, the order-at-your-booth tablets in restaurants, and the order-on-the-go app for your favorite coffee place?
Just because the government mandates a $15 an hour starting wage doesn't mean that all companies can afford to pay it, or that the economy can sustain it.
Connecticut has just achieved one of the highest minimum wages in the country. Going higher at this critical time will accelerate the trend of labor saving automation.
The timing couldn't be worse. Connecticut desperately needs to grow jobs, not price them out of reach.

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Pete Gioia is an economist with CBIA. Follow him on Twitter @CTEconomist.