In Politics, Every Silver Lining Has A Cloud

Many of the least-affluent residents of Washington, D.C., will soon have a chance to shop at a local Wal-Mart (WMT), and some will get jobs at the giant retailer. This is, of course, good news.

But in politics, every silver lining must come with a cloud. The cloud over the nation’s capital is a prospective hike in the city’s minimum wage, which, like all such hikes, will hurt some of those same worse-off residents by taking away the chance to get any job at all.

This give-a-little, take-a-little dance comes courtesy of the city’s elite and their labor union allies, who tried to keep Wal-Mart out of the district unless it was prepared to pay at least $12.50 an hour to all workers, regardless of skill level or full- or part-time status. Not that this would have stopped the elite from shopping at Wal-Mart if they wished, because Wal-Mart stores in nearby Maryland and Virginia are available to anyone who can reach them. Affluent Washingtonians usually have cars that enable suburban shopping; poor folks often do not.

Further, affluent Washingtonians never need to work for minimum wage. Their children can consider taking unpaid internships that build resumes and connections, smoothing their passage into the next generation of affluence. Young adults and teens who come from poor families can’t afford to work for free. Even part-time jobs at minimum wage can make a big difference for poor youth, putting them on the first rung of the career ladder.

So it was good news when Washington’s mayor vetoed the bill that aimed at Wal-Mart, and it was even better news when, last week, the D.C. council failed to override the mayoral veto.

The political price to be paid for defeating this selfish legislation (which was aimed at protecting unionized jobs at the grocers that sorely wanted to keep Wal-Mart at bay) is expected to be a further increase in the district’s legislated minimum wage. That will result in a level playing field, in that it will hurt all businesses and prospective workers more equally than the anti-Wal-Mart legislation would have. But that’s about the only good thing you can say for it.

Under a higher minimum wage, it will not only be illegal for employers to buy workers’ labor at a lower price; it will also be illegal for workers to sell at a lower price. Like all price floors, this agenda protects high-priced vendors (think older, unionized, experienced and full-time “vendors” of labor) at the expense of low-priced vendors (think younger, non-union, inexperienced, part-time teenagers and other workers) in the labor market.

The D.C. unemployment rate in July was a painful 9 percent, nearly two percentage points higher than the national rate. Worse, the unemployment rate for youths 16 to 19 in D.C. was 34 percent as of last year. For those aged 20 to 24, a demographic that is more dependent on full-time work than teenagers, the rate was 13.7 percent. A higher minimum wage will make it harder than ever for those people to get their start in the labor market.

Backers of the higher minimum will offer the usual red herrings about the impossibility of supporting a family on a minimum wage job. That’s true, but relevant only in a Father Knows Best world, where every job is held by a full-time wage-earning breadwinner whose partner is presumably home packing lunches for the kids. That’s not the world in which we live. Someone who needs to command higher wages – and can – does not take a minimum wage job. Only someone who can’t get paid more chooses to work for less. The point of a minimum wage is to take away that choice, and the labor competition that comes with it. When this happens, most such jobs do not go to workers at higher wages; they just go away.

It is too bad D.C.’s young people will pay the political price for their neighbors to be able to shop at a local Wal-Mart. It’s a good trade if a trade had to be made, which it apparently does in the world of Washington politics. But it’s a bad deal for those kids.

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About Larry M. Elkin 564 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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