For those who are new to my blog, I run recreation sites like campgrounds, mostly with retired people as labor. Retired people love these jobs, because they are looking for a nice place to live for the summer in their RV. Often they are willing to work just for their site and utilities, though as a private entity I must pay them minimum wage as well (when they work for the government, they don't get paid). We sometimes get into odd situations -- for example, because of a disability payment or Social Security limits, it is not unusual I have employees that ask me if I could not pay them or pay them below minimum wage, and I have to tell them no (minimum wage is absolutely required, even if the worker begs to be paid less).
This relationship works out well. The retired persons bring conscientious and low-cost management to the campgrounds. Our employees, who usually are living comfortably off their retirement savings or pension, get a few extra bucks and a nice place to live for the summer. These folks may work a bit slow, but I can afford that at $6 an hour.
But what happens when a state like Maryland, because it's got its blood up against Wal-Mart, passes a $11.30 "living" wage? A number of problems result. First, a camping night generally consumes, on average, about an hour of labor. At $6 an hour with 22% burden for payroll taxes and workers comp, this totals to $7.32 per night of camping in labor. At $11.30 an hour, this totals $13.79 per night of camping. Most of our campsites are tent camping sites and more primitive natural campgrounds (see here) and a typical price for a night of camping is $16. This is a very low price for camping when compared to large RV parks, and makes our sites particularly popular with lower income people. The Marlyland minimum wage would add at least $6.50 to this price, or increase prices by 41% in one swoop. And this is before considering second order cost increases in other purchased goods and utilities due to the minimum wage increase.
The other problem is one I would have thought so obvious that it is amazing to me that no one seems to talk about it -- not everyone earning minimum wage is trying to live on it. Certainly people new to the work force are one example, as they are often willing to trade lower initial wages for training and experience and a work record and other valuable but non-quantifiable benefits. In my case, while I am perfectly happy to tolerate lower productivity from older, retired workers at $6 an hour (the average age of my employees is over 70), when wages are forced arbitrarily to over $11, then I have to think about changing my business model, substituting younger workers for older folks. As any economist would predict, lower productivity workers get pushed out of the market.
For more on this topic, I discussed four case studies in my business dealing with the minimum wage.