Why Raising the Minimum Wage In Birmingham Won't Work

17 Mar 2016
Why Raising the Minimum Wage In Birmingham Won't Work Comeback Town David Sher

Before you folks who favor raising the Birmingham minimum wage start beating me up…please listen to what I have to say.

This piece is not about whether raising the minimum wage is a good idea or not. I’ve read arguments for and against and I’m not taking sides.

This is about raising the minimum wage specifically for the City of Birmingham. In case you haven’t kept up with the news, the City of Birmingham recently passed legislation to increase the minimum wage. The Alabama State Legislature immediately overruled that legislation denying that right for any Alabama city.

Why minimum wage hike for Birmingham is pointless

If you had a business in a food court that tried to sell Coca-Cola for $2.00 when 35 competing restaurants in plain sight sold it for $1.00–you wouldn’t sell many Cokes. The City of Birmingham is surrounded by 35+ municipalities. If it makes rules that drive up the cost of doing business in Birmingham, companies will select locations nearby. Gas stations near the Alabama state line are much busier than gas stations just inside Georgia and Florida. Gas taxes are lower in Alabama and people choose to save money on gas.

When you drive to Atlanta on I-20, you may have noticed when you get close to the Georgia state line, you pass two fireworks superstores—one on either side of the interstate. Ever wonder why? Until recently, the State of Georgia banned the sale of fireworks. So people from Georgia were forced to travel to Alabama to make their fireworks purchases. However, Georgia must have realized the folly in their law and eliminated the fireworks retail ban in 2015. People cross over the state line to buy lottery tickets in Georgia and they travel to Mississippi to gamble.

What does this have to do with implementing a minimum wage for Birmingham?

It’s pointless for governments to tell people what to do when they have other legal options. The same is true for businesses. Companies are like people. When companies have options, they act in their own interest. That’s how human nature and the free enterprise system works. When a company considers opening a headquarters or branch in Jefferson County, before they select a site, they will study the cost of doing business there. The City of Birmingham compared to Homewood, Hoover, or other surrounding cities has higher business taxes higher sales taxes 1% occupational tax for the employees , managers, and owners and–if allowed-would have a higher minimum wage.

You may have read that cities like Louisville have successfully enacted minimum wage legislation. However, Louisville has one county/city government. Every company in the county pays the same taxes and the same minimum wage. There is no advantage for a company to select one neighborhood of Louisville over another.

The City of Birmingham is painted into a corner.

Every time we raise a tax or make a decision that penalizes business—we lose businesses and jobs. If our goal is to raise people out of poverty by hiking the minimum wage, the end result will be the opposite. Companies and jobs will avoid the City of Birmingham–and who could blame them?

Maybe the City should lower its taxes and companies will move out of the suburbs into the City. That seems to be the way we solve problems here.

We are the enemy and we compete against one another.

A minimum wage for the City of Birmingham?–not a good idea unless it’s implemented by all surrounding municipalities. And we have plenty of surrounding municipalities.

Editor’s note: I own a minority interest in a business located in Hoover. (Not in the City of Birmingham). All employees make more than minimum wage.

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David Sher is co-CEO of AmSher Compassionate Collections. He’s past Chairman of the Birmingham Regional Chamber of Commerce (BBA), Operation New Birmingham (REV Birmingham), and the City Action Partnership (CAP).

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