Friday, August 3, 2012

The Minimum Wage is Bad for the Poor

Do you remember when grocery stores had baggers floating between a few registers?  They weren't in a hurry, they didn't cram a dozen items in one sack, and they would even help you out to your car.  As a general rule, that job doesn't exist anymore.  Window washers at service stations don't exist anymore.

A lot of little niceties of daily life just aren't included anymore.  Most of us think, well, companies are just cutting back.  They don't want to pay for those nice touches anymore.  We're only partly right.

When I was in high school, I worked as a warehouse stocker and delivery driver for an electrical supply house.  I made $4.25/hour and worked my tail off.  There was enough work for 2-3 of us.  The problem was that, well, that job wasn't worth much more than $4.25/hour.  So, the company made do with one where 2 or 3 would have done a more thorough job.

That company doesn't hire high-school students anymore.

Later, when I was looking for other work, I had this and other jobs that I could list on my resume, to show that I knew what an honest days work was, that I had some appreciation for toil, or that I had skills with invoicing, stocking, or delivery.  Many of today's youths won't have that opportunity to work, earn a wage, and gain valuable experience in the work-place.

Employers used to be willing to bring on a young adult and train them.  To take someone with no experience, pay them a small wage and pay them more in skills and training and then bump them to a higher wage once they reached an earning capacity.  This is becoming another rarity.  You see, at a certain point, the cost to the employer got too high, the benefit of training someone from scratch was outweighed by the cost of paying them a minimum wage.  So, now requirements for work are going up.  You can't learn a skilled trade on the job, you have to know something coming in.  Vocational schools are booming, trade schools are booming.  Employment for the young is down.  By the way, these vocational and trade schools are hideously expensive.  Some costing more per semester than a full public university's tuition.  And people are paying.

What this tells me is that these mentorships, apprenticeships, or low paying, learn as you go jobs have value much beyond their would be low wage, at least, for the holder of that job.  For the employer, not so much.  For the employer, it's normally a slight drag on production at first, that slowly yields some production gains until he has a viable employee.  Some forms of mentorships and apprenticeships are still available under current laws, but require payment of a minimum wage.  For employers faced with this added burden, many have simply elected to stop apprenticeships and shifted the burden for receiving the training squarely onto their future employees.

If a career is a ladder, with each rung you climb giving you some foundation in skills and experience for the next rung you reach, then the minimum wage laws in this country have effectively removed the bottom rungs from the ladder.  This is fine for everyone above that or marginally close to that level, but for those just starting out, it signals a lack of opportunity, a mandate that they must go out and pay for their own education and experience instead of learning through work.

Many people comport the minimum wage to a living wage or a minimum standard of living, but this ignores the reality.  Greater than 98% of working people in this country make MORE than the minimum wage.  This isn't because the government makes them do it.  These are market forces at work.  Which begs the question about that slightly more than 1%, who are they and why are they making so little.

That small group consists primarily of teenagers.  High school and college students with little skills to offer performing jobs with little skills required.  There is a lot of competition for these jobs.  There are fewer of them each time the minimum wage is increased, and there are always plenty of kids needing to gain employment history.  So, who will "suffer" if the minimum wage is abolished?  Less than 2% of the workforce stands to have to compete on price for their job.  More people competing will realistically force those wage points down.  For many of these jobs, it's unlikely that the price point can go too low.  People will make their own decisions about what their time is worth and employers will be allowed to find the price point and employment level that they are willing to pay.  We would likely see a 10-20% dip in the wage level for these positions, but also are likely to see a reduction in unemployment for the young.

What about the rest of the workers?  Wouldn't their wages be dragged down too?  Ummm.  No.  There is no mandate that employers pay the wages they currently pay ABOVE the minimum wage.  The only thing that would lower those wages is a slumping economy, a smaller job pool and increased competition for those jobs.

There is this irrational paranoia by people who support these massive government regulations that I will discuss in further detail in the near future, but it revolves around the idea that without the restraining hand of government, businesses would exploit us.  My experience has taught me that it is more often that exploitation happens with the assistance of the hand of government restraining the individual from seeking alternatives.  Ask yourself this question.  If the restraining hand of government is necessary to keep our nation from spiraling into poverty and to keep employers from enslaving us all, why are greater than 98% of jobs paying more than the paltry amount government demands?