An ally in the minimum wage battle

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Lois A. Bowers
Lois A. Bowers

Senior living operators who oppose an increase in the national minimum wage from $7.25 to $15 have an ally in Richard Fisher.

The 2005–2015 president and CEO of the Federal Reserve Bank in Dallas spoke on economic trends March 10 at the National Investment Center for Seniors Housing and Care's 2016 Spring Investment Forum. He discussed the federal minimum wage, which hasn't been raised since 2009, in a question-and-answer session after his lunchtime keynote speech.

The cost of labor is the number one cost of running a business, Fisher told those attending the luncheon, and the cost of human capital is driving the cost.

Fisher, 67, said he held jobs as a busboy, bartender and waiter early in his life and made 10 cents an hour. “I learned a lot about people — the good, the bad and the never-want-to-see-again,” he said.

So although Fisher said he is sympathetic to the plight of workers, he added that “forcing a pay scale upon these people is not the best policy.” In fact, Fisher said, doing so could displace workers.

“I understand what's behind it politically,” he said, but he predicted that if such an increase comes to fruition, companies would look to replace workers with technology as much as possible. It's already happening in the restaurant industry, Fisher noted, where some chains position devices on tables that enable diners to order appetizers and complete other transactions without human interaction.

A report released by the University of California, Berkeley, on the same day as Fisher's remarks at the NIC meeting, however, argues that, despite some resulting automation, a wage hike could contain positive news for employers, employees and the economy.

The authors specifically examined a proposed increase in minimum wage, to $15, in the state of New York using data from the Census Bureau and Department of Labor and other information. An improvement in the standard of living for workers there — more than 3 million people, many of them working in healthcare and social assistance jobs, would see average wages include more than 23% — “would greatly outweigh the small effect on employment,” they concluded.

“We looked carefully at both sides of the equation, the effects on businesses and the effects on workers. Businesses will adapt,” said the study's lead author, Michael Reich, Ph.D., professor of economics and chairman of the Center on Wage and Employment Dynamics. “Efficiencies and turnover saving will offset a good part of the wage increases, and modest prices increases — spread across all consumers — will cover the rest. The increased consumer spending from the higher wages will generate more business and jobs.”

Effects will vary among geographic regions and industries, according to the Reich and his co-authors.

Lawmakers and employers can look for future ramifications in the real-world economies of cities and the dozens of states where the minimum wage is now higher than the federal rate, although no state's rate is at $15.

Lois A. Bowers is senior editor of McKnight's Senior Living. Contact her at lois.bowers@mcknights.com. Follow her on Twitter @Lois_Bowers.

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