Fast-food economics in Massachusetts: Higher minimum wage leads to a shorter work week, not fewer people on welfare

One reason for a $15/hour minimum wage cited by advocates is that current minimum wage workers are generally on welfare (public housing and Medicaid if not also food stamps, etc.) and therefore, the theory goes, the employer is being subsidized by taxpayers.

(How a $15/hour job would lift a household above the welfare thresholds is unclear; in our corner of Massachusetts, a family of four is entitled to housing and/or health insurance subsidies up to $130,000/year. At $15/hour, that’s 167 hours/week, 52 weeks/year.)

I recently talked to the owner of 12 fast-food outlets here in Massachusetts. He is a Democrat and enthusiastically supports the party’s proposals for increasing the number of migrants to the U.S. “Immigrants work harder than Americans,” he said, “who have been on welfare for multiple generations and don’t have a culture of work.” He also appreciates immigrants as customers.

There is one part of the Democrat platform that he does not agree with: the $15/hour minimum wage. “Every time wages go up,” he said, “my employees ask to work fewer hours so that they don’t lose MassHealth [Medicaid].” On his side, he does not want anyone working more than 30 hours per week, the threshold that would trigger a requirement for him to provide health insurance under Obamacare. Out of 160 workers total, he provides health insurance to only 10. “My premiums are sky-high,” he noted, “because we have so few people on the policy.”

(This may show the irrelevance of Econ 101 principles in a half-planned economy like the U.S. Econ 101 says that the higher wage would induce workers to supply more labor hours, not fewer. But Econ 101 never met MassHealth and other means-tested programs!)

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3 thoughts on “Fast-food economics in Massachusetts: Higher minimum wage leads to a shorter work week, not fewer people on welfare

  1. “Every time wages go up,” he said, “my employees ask to work fewer hours so that they don’t lose MassHealth [Medicaid].” On his side, he does not want anyone working more than 30 hours per week, the threshold that would trigger a requirement for him to provide health insurance under Obamacare. Out of 160 workers total, he provides health insurance to only 10. “My premiums are sky-high,” he noted, “because we have so few people on the policy.”

    My reaction to stories like this is usually that these are problems that they don’t have in Canada. It’s also another great argument for Medicare for All! Besides allowing this guy to spend less time managing employee benefits, it would eliminate a welfare program – Medicaid.

    • Medicare for All is not remotely comparable to a national health service. The same multi-layer system of grifts and boondoggles would continue to incinerate 20% of GDP.

      If we can’t have a proper freemarket fix (mostly antitrust enforcement) then the solution is fedcare, not universal medicare. Actual federal employee doctors and nurses with federally owned equipment in federally owned buildings. Like the NHS.

  2. Econ 101 says that if you place artificial price floor on something (labor in this case) you will get oversupply (in this case more people looking for work than jobs — i.e. involuntary unemployment).

    The law of supply and demand doesn’t care about legal laws – it is nothing more than a mathematical statement saying that monotonously raising and monotonously dropping curves sweeping the same image and domain will intersect at the single point. You can only get market clearing (i.e. balanced supply and demand in the long term) if market is allowed to discover the price.

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