Pitching Florida’s Cheap Labor

Pitching Florida’s Cheap Labor

Enterprise Florida, which is going through a dramatic restructuring after the Legislature refused to provide the quarter-billion-dollar infusion requested by Governor Rick Scott, still has the capacity to pitch a message . . . and stir up controversy.

I hasten to add that this is nothing new.

Governor Scott’s job creation campaign has included a lot of effort to snatch jobs from other states. Enterprise Florida has provided the background music for his recruitment visits to other states, often in discordant ways. The current trip to California is no exception.

In California’s case, the “pitch” focuses on the minimum wage.

For those who haven’t been interested in what’s happening in our nation’s Pacific theater, the State of California has committed to a gradual increase in the minimum wage to $15/hour by 2022. The Enterprise Florida ad focuses on that figure and the 700,000 jobs the ad says the increase will be lost as a result.

The research on the effects of minimum wage increases paints a mixed picture. My best assessment (and remember, I’m neither an economist nor an expert on minimum wage policy) is that increasing the minimum wage, especially substantially, probably does lead to some reduction in employment opportunities, and probably mostly among low-wage workers.

This is, in part, simply logical. If companies see an increase in their labor costs, they have to adapt. If revenue increases on pace with the increase in costs (or better than that increase), they may simply absorb it. If revenue increases less than the increase in cost, they will look for cost-cutting measures they can adopt. No surprises there.

And one of the places they may be able to cut costs is to reduce the number of people they employ.

Just how large, or small, this adverse impact on employment would be depends greatly on a variety of other variables. The Congressional Budget Office, when estimating the impact of a nationwide increase in the minimum wage to $10.10/hour, offered up 500,000 as the likely number of jobs lost, but added that it might be as low as a few thousand or as many as a million. Macroeconomics, one must acknowledge here, is not an exact science.

The same logic, also backed by research, would lead us to conclude that, for those who retain their jobs, their income would go up. Studies, including the CBO analysis mentioned above, suggest a meaningful percentage of the working population benefits in increased income from an increase in the minimum wage.

Such a benefit also may not be limited to those on the lowest rung of the compensation ladder. As those paid the least are paid more, those already earning more expect to see their wages increase as well. This pressure peters out at some point (CEOs of major corporations probably don’t experience it), but there is something of a ripple effect up the wage ladder.

So, is raising the minimum wage a good thing or a bad thing?

As that one enigmatic relationship status option says on Facebook, it’s complicated.

What about recruiting businesses based on a lower minimum wage? What about the pitch to California companies that Florida has all the sunshine and a much cheaper labor pool?

Florida has something of a history here. We’ve been a cheap labor state for a long time. The corporate relocations we’ve brought to our Sunshine State, before as well as during the Governor Scott administration, often have been on the lower end of the employment scale.

Back in December 2015, outgoing director of Florida’s Department of Economic Opportunity, Jesse Panuccio, acknowledged that there had been too much reliance in the “Back to Work” campaign on lower-wage industries. He also indicated that Governor Scott was cognizant of that fact and was pivoting toward a focus on higher-quality job growth.

But listening to the pitch Enterprise Florida is making on the governor’s behalf, I’m not so sure.

And I’m just a little worried.

If we sell ourselves as the state of cheap labor, it seems likely that the corporate relocations we attract will be looking to go cheap.

And whatever the impact may be on the raw number of jobs, growing our economy on jobs that pay minimal wages will not do much for the lives of ordinary Floridians.