No, this idea is absurd, in part because so much of the current salary could, in one way or another, end up being reclassified as “tips.”
But there is a deep problem with the Democratic Party’s version of the idea. As you may know, Democrats, and to some extent Republicans, favor raising the minimum wage. They don’t think that will cause a lot of unemployment, so in other words, they think the demand for workers is very low.
Whether or not you agree with the inelasticity point, let’s just run with that one for now.
If the demand for workers is weak, the amount of the wage subsidy is taken primarily by the employer. Wage subsidies come in, and the employer doesn’t start trying to hire more workers because of it. After all, the need to work is absurd. Since the demand for labor has not increased, the total wage does not increase in final equilibrium. The employer can simply keep the subsidy, or if the subsidy is given to the worker, the employer can reduce wages (or the level of working conditions), leaving the previous total wage and the worker will not leave.
So if you think minimum wage increases are a good idea, you should also think that unpaid tips will benefit the manager, not the employees.
And yet emotional coherence prevails instead.
#TheGreatForgetting
Source link