Why raising the minimum wage won’t work for Birmingham

Two fireworks superstores on I-20 in Alabama near Georgia line; one on each side of Interstate
Fireworks superstores on I-20 in Alabama near Georgia line on each side of Interstate

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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10 thoughts on “Why raising the minimum wage won’t work for Birmingham”

  1. *The flaw in that logic however is that by this logic the minimum wage should never be raised unless it can be raised in every city and state across the country at the same time. By this logic if you raise it in one city or state then businesses will never locate there if there is a city or state nearby that has a lower minimum wage. While that may have some merit it clearly isn’t the only reason businesses choose to locate in one area vs another. Real estate, cost of living, crime levels, etc all play roles in whether a business locates to an area or not. 

  2. *Thanks for the insight David.  I’ll also say that raising the minimum wage (especially to the proposed $10.10/hr) would cut jobs and decrease customer service (productivity).   Could you imagine every fast food and restaurant in town taking on these costs?  They would lay people off to keep their labor line item normalized and we would experience a decrease in productivity and customer service, thus we wouldn’t go out to eat as much, thus they wouldn’t make as much revenue…….and the cycle goes on and on and on…… 

  3. *I agree with James B.   Businesses primarily choose the burbs for real estate and tax purposes, not wages.  History has shown that raising the minimum wage does not lead to job loss. See:  http://www.businessforafairminimumwage.org/news/00135/research-shows-minimum-wage-increases-do-not-cause-job-loss. While Georgia did rescind its ban on selling fireworks due to Alabama permitting them, the inverse rings hollow.  In fact, as a former Georgia resident, I appreciate Alabama residents, who crossed the line to purchase lottery tickets, which financed my children’s pre-K education and their tuition at University of Georgia.  Thank you!  The border argument for-and-against runs both ways.  For sure,  it would be harder for a business in Mt. Brook to keep a valued employee at $7.25/hour, when s/he could work for a proprietor in Birmingham for $10.00/hour.  

  4. *How ironic is it that white men like Mr. Sher or Mr.
    Faulkner from Vestavia and Mountain Brook see no issue with controlling the
    happenings of Birmingham? The same white men who refuse to be part of the
    Birmingham community want to exert their power over the big nonwhite city.

    Why is it that white men who refuse to live in Birmingham,
    refuse to send their kids to school in Birmingham, refuse to be part of
    rebuilding Birmingham, get to decide what is good for Birmingham?

    If Mountain Brook, Vestavia, or any other city, town or
    municipality want to change the rate of taxes or minimum wage, why should the
    citizens of that city, town, or municipality not be afforded the right to do
    so?  

    Why is it wrong for Birmingham to raise minimum wage for
    employees within its city limits? See what has happened in other cities that are
    close Birmingham’s size when they raised the minimum wage (Portland ME, Louisville
    KY, etc.). Spoiler alert…. the positive effects of citizens earning a living
    wage spilled out beyond the city limits.

    Why is it wrong for a person to be able to earn more money?
    Why is it wrong for a person to get a raise? Why is it wrong for a person to
    earn a reasonable and affordable wage? Why would a person in Mountain Brook or
    Vestavia care if someone in Birmingham gets a raise?

    My opinion is this issue comes down to one thing…power. White
    men have always had power over Birmingham. In the 50’s and 60’s when some of
    that power was eroded by Supreme Court segregation rulings white men moved
    their families to the suburbs and formed new school systems. It is no secret
    why Mountain Brook and Vestavia formed their own school systems…because they
    longer had power over the school system in Birmingham.

    Birmingham will never be able to move forward as long as
    white men such as Mr. Sher and Mr. Faulkner continue to pursue their lust for
    power through the enslavement of the noble citizens of Birmingham.

    1. Mr. Black, thanks for your comments. I would like to clarily. I absolutely think it is wrong for the State to make rules for the City of Birmingham. In fact, the whole purpose of the ComebackTown blog is to consider finding a way to change our government structure. I also did not say I was against raising the minimum wage–I stated that from the beginning. Actually my writing wasn’t really about the minimum wage. It was how we have divided ourselves into 35+ competing cities and how that hurts everyone. Birmingham has higher business taxes, occupational taxes, and sales taxes. Louisville, as I stated, is one County-City. So are many of our competing Cities–Nashville, Charlotte, Indianapolis, etc. Please consider reading ComebackTown more often and I hope you will see that my intent is to help change goverenment structure to allow everyone–white, black, or Latino to prosper. Thanks for commenting. I hope to hear from you often.

  5. * A very intelligent economist in Chicago stated several years ago and I believe quite correctly that minimum wage any time or any where is the wrong thing to do. It causes the loss of jobs and decline of the economy. If young people for example can not start up the wage latter at a low level then they may never be able to get a good job and that might contribute to such things as increase of crime, and most certainly dependence on welfare for survival. A city with that kind of population is not a good city. With higher wage being required, it may be more difficult for new small businesses to start up. It becomes quickly an issue between high wages or no wages. 

    Not only is the minimum wage issue of serious consideration for the City of Birmingham but those taxes. Under consideration should be a serious extended study of all this by expert economists hired by the city, The city very much needs to get this right as it is on the edge of moving forward so that movement is not one step forward and two steps backward.  More businesses and more jobs should result in more revenue. And Birmingham city’s government, as in any other city, certainly needs revenue to do its job.

    When will the time come that Birmingham is a leading city and not just a following one?      

  6. *Further:  I fully agree that the state being in control of its cities has only served to keep them down. In the old days that was competitive thinking between agriculturists and industrialists.  That has got to stop for cites AND the state to succeed in moving successfully into the future.  I recall when George Wallace set up the aviation fuel tax to build an airport in every county. At a time the Birmingham’s airport was a little more able to deal with Atlanta’s airport expansion it was killed. No airline would refuel in Birmingham. No none!

    And what good did it do to have 67 little airports all over the place. Some were helped a little and others not much if any at all. Beware of bad assumptions and useless thinking.  

  7. *And finally it certainly is a destructive process for African Americans and Whites to fail to work closely and positively together. No city can succeed with that going on.

  8. *To consider uniting all 35 municipalities into one government as a viable way to promote unity is to assume that the black  citizens of Birmingham have reason to trust the values of other majority white municipalities, and we have no real reason to trust these values.  It was the lack of embracing the inherent human value of people of African decent that led to these suburbs being created in the first place through white flight.  There has not been enough of deep committed self-purification of the culture of white supremacy in these majority white municipalities–a first step in building that trust. Hegemony is never the answer, and cultural erasure is the collateral damage of hegemony.   

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