The city of Dallas is deeply in debt, and a recent vote by its City Council demanding that all contractors pay all workers a "living wage" of at least $10.37 will only make matters worse. The arbitrary and capricious requirement will cost Dallas taxpayers an estimated $12 million per year. And it will reduce opportunities for young and inexperienced workers.
"Dallas will require all contractors and subcontractors working for the city to pay their employees at least a ‘living wage' - initially $10.37 an hour," the Dallas Morning News reported. "City Council members Tuesday approved the requirement 14-1, despite ongoing disagreement over whether that across-the-board mandate is preferable to merely considering wages as a criterion in the bidding process for contracts."
And council members pledged to keep raising the wage.
"The minimum wage approved will be adjusted annually to meet the Massachusetts Institute of Technology's calculated living wage for a single adult in Dallas County," the News noted.
They breezily waved off questions about what it will cost Dallas residents.
"Three million, whether it's more or less, it's worth it," said council member Scott Griggs.
But like all efforts to raise the minimum wage, this is going to backfire on Dallas.
"Artificially increasing city wages is misguided policy," said Allegra Hill, policy analyst in the Center for Local Governance at the Texas Public Policy Foundation. "This is a prime example of how the good intentions of government can lead to bad results for taxpayers and the economy. When government mandates wage increases, taxpayers pay more for goods and services and potential employees who might have otherwise obtained employment get priced out of the labor market."
The Cato Institute's James Dorn explains it's really simple economics.
"The law of demand is more powerful than the minimum wage law: When the price of anything, including labor, goes up, the quantity demanded goes down, other things constant," Dorn wrote recently. "No one has ever disproven this economic law."
The argument that supporters of a minimum wage hike make is that consumption will rise. But that shows a poor understanding of the underlying economic principles.
"Proponents of the minimum wage argue that those workers who do retain their jobs will consume more, which will increase aggregate demand and increase GDP," Dorn explains. "But that line of argument is a case of upside-down economics. Consumption is not a determinant of economic growth; it is the result of a prior increase in production. Workers cannot be paid what they haven't first produced. A higher minimum wage - without a corresponding increase in the demand for labor caused by an increase in labor productivity (due to more capital per worker, better technology, or more education) - will mean fewer jobs, slower job growth, and higher unemployment for lower-skilled workers."
Dallas property owners aren't the only ones who will suffer because of this move. Young workers will have less opportunity because of it. As Dorn notes, "Cutting that ladder off by mandating a higher minimum wage is a recipe for poverty, not progress."