mcd2-150x150-8853938There’s a good reason for Governor Cuomo’s Fast Food Wage Board to decide against raising the minimum wage for fast-food workers: many of them won’t benefit from it.

In testimony submitted to the wage board today, Diana Furchtgott-Roth, an economist and Manhattan Institute senior fellow, cited the inevitable substitution effects that will follow any wage increase.

Furchtgott-Roth, a former U.S. Labor Department chief economists who also served as staff director of the president’s Council of Economic Advisors, also flagged several key problems with the board’s approach. Among them:

  • The wage board’s ruling could be easily bypassed. Restaurants would have the ability to outsource functions, such as food preparation and cleaning, to employers paying the regular minimum wage. Employees filling those roles now would likely face layoffs.
  • Young people would have a harder time finding seasonal or part-time work. If the Wage Board is determined to raise the fast-food pay floor, it should exempt aged 22 and younger, she said.

Although organized labor is lending its political muscle to the drive for higher wages, unions will probably seek carve-outs, Furchtgott-Roth said.

She noted that the Service Employees International Union (SEIU), one of the main proponents for hiking the wage and whose secretary-treasurer sits on the Wage Board, has a track record of seeking exemptions from minimum wage mandates that allow employers to pay below the minimum wage—if their employees unionize.

Unions—including SEIU—are looking for such a carve-out in Los Angeles now, and it was a cornerstone of SEIU’s pioneering effort for a $15 wage in SeaTac, Washington.

“The minimum wage and carve-out,” noted Furchtgott-Roth, “would serve as a way for unions to extort fast food companies into union representation.” SEIU has demonstrated that it would rather collect dues from a worker than have that same worker earn a higher wage.

Furchtgott-Roth also calculated that raising the wage to $15 would result in prices jumping about 22 percent; the increase would be lower, around 15 percent, if management could “substitute away from” direct labor.

“Supersizing a wage,” Furchtgott-Roth warned, “is not as easy as supersizing a hamburger.”

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Ken Girardin

Ken Girardin is the Empire Center’s Director of Strategic Initiatives.

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