Friday, October 31, 2014

Given All The Hand-Wringing Over South Dakota Being A Low-Wage State, Why Is There Even A Conversation Over Initiated Measure 18? Pass The Thing, For Crying Out Loud.

     I think the South Dakota Retailers Association (of which I'm a dues-paying member in good standing) is nuts to be putting up such a spirited fight against Initiated Measure 18.  It's the ballot issue that will immediately raise the minimum wage in South Dakota from $7.25 to $8.50 an hour and provide for annual cost of living increases every year thereafter.  Along with SDRA, the South Dakota Chamber of Commerce and Industry also opposes the measure, the general argument being that being forced to raise wages for their lowest-paid employees will actually decrease employment.  I think that's basically a lot of hooey.  The non-partisan South Dakota Budget and Policy Institute last September did, in fact, conclude 357 South Dakotans would lose their jobs over the increase, but in a state with 450,000 workers that number is so statistically insignificant as to be meaningless.
     In that same SDBPI report, the institute notes that about 1 out of 6 South Dakotans would see wage increases if IM 18 passes.  That's about 17% of the workforce, or 77,000 people, and it makes me pose this question:  Retailers and Cof C types, aren't you missing something?  While you rail against employers being forced to raise wages from exploitative to merely sub-subsistence levels, consider that nearly 80,000 South Dakotans will be getting an extra couple of hundred bucks a month to spend in your businesses if IM 18 passes.  Do the math.  That's 15 million bucks a month!  Who's the genius at the Retailers association that's so dead set against that?  Meantime, I want to meet the SDBPI economists who thinks that sudden surge of spending is likely to result in a loss of any jobs whatsoever.
     First thing I'd show them is a report last Summer from the Center For Economic Policy and Research that shows exactly the opposite.  The  CEPR report cites a Goldman, Sachs study showing that the 13 states that raised their minimum wages at the beginning of 2014 have experienced faster job growth rates than the 37 that haven't. I have absolutely no doubt whatsoever that in every one of those states that raised the minimum wage there was a cadre of doubting Thomases from the business community who insisted that job losses would occur as a result.  The fact is, reality and common sense have proven them wrong.
     I see in the Rapid City Journal today that the editorial board recommends a No vote on IM 18, explaining that market forces "tend to do a good job" of setting wages.  I really couldn't disagree more, and I believe that the labor shortage in South Dakota contradicts the notion that market forces here have done a good job of "managing who gets paid what," as RCJ put it. Governor Daugaard himself set a tone of serious concern about our labor situation by initiating a series of "workforce summits" to address the issue in 2014.  I believe if the labor market were efficient in South Dakota, that chronic worker shortages wouldn't be the bane of economic growth in this state.
     This is a situation where voters can indeed kick start the state into a realm of competitive wages, because the organizational stasis evidenced by South Dakota's leading business organizations won't get us to budge off our low-wage, low-job numbers dime.  The trees of marginal cost increases created by higher wages are blinding opponents to the forest of a surging economy. IM 18 puts more spending cash into the hands of the very people who are responsible for the strength of our economy in the first place.


  1. How many wage earners would receive a raise as opposed to youth? Do you expect if labor costs go up the people who pay will just take less? Any normal intelligent rational person knows there are few options. Fewer jobs. Probably few people getting fired, but I bet you would see fewer people replaced. This is also going to put pressure on prices. In order to afford to pay those increases, prices will need to go up. As a retailer in good standing you probably know this. There will also be pressure on other people's wages. People who are already making somewhere near that magical $8.50 will be looking for another $1.25 raise as well. This is one of the reasons labor unions like increasing minimum wages. Their wages are often tied to the minimum wage. If you as a member of the SDRA want to pay a higher wage, go for it. Just don't tell other people they have to. BTW, if you increase your wages voluntarily, others will feel the pressure.

  2. A person will not be able to make a living for a family on $8.50/hr either. This wage is mostly earned by kids just entering the labor market, not people trying to feed their families. If you want to earn more money, stay in school, get an education, work hard, get noticed for initiative, get an apprenticeship - anything, just improve your own situation. Personally, if the minimum wage is raised a small amount, I really don't care. What I don't like is that it will be tied to the cost of living. I didn't get a cost of living increase each year; most people don't; so why add this in. I hope it loses just because of this. I agree that $7+ is not a living wage; it's not meant to be. It's meant to be an entry wage to the job market, and most employers pay more than that anyway simply because they choose to. As said above, no one is preventing any employer from paying whatever he chooses; just don't mandate it.

  3. You both completely ignore my argument about the macro-economic effects of a wage increase. Reread the SDPBI report I linked and note that the 77,000 affected South Dakotans will have a total of $15 million/month of disposable income to spend. I'm confident that the net effect of this will only be a noticeable boost to South Dakota's economy.