Friday, December 13, 2013

Six Points Against a Higher Minimum Wage

Over the past few weeks, the most press related to jobs has gone to the effort by fast-food workers to be paid much more, usually $15 per hour.  It seems like an easy thing to sympathize with – they work hard, are often educated and skilled beyond what they do, and the companies named are immense and lucrative.  The workers are not unionized, seem to have little legal representation, and number in the millions nationwide.  Their push for more money seems to symbolize rebellion against the worsening of jobs all over the country, and many have maintained that if we could only pay them “a living wage,” such positions would become much better and a lot of poverty would end.

It is true that there would be some good things resulting from a higher minimum.  The bad things, however, are more substantial.  I count six reasons why the minimum wage should not be increased.

First, not every low-paying job is with a large and very profitable company.  When I read about workers dissatisfied with their low pay, they always seem to work at Wal-Mart, McDonalds, Burger King, or the like, never at the corner grocery store that’s having trouble paying its bills, the new small venture where the owner is joined by one or two $7.25-per-hour helpers, or in the back of a small town’s only restaurant.   In reality, most low-paid employees work for places you’ve never heard of, many of which simply can’t, from a practical business standpoint, give them anything like $15 per hour.

Second, the country is over 19 million jobs short, and forcibly raising pay for many will make that number higher.  I don’t know the exact effect minimum wage raises have had in the past, and I’m not sure anyone conclusively does – the data doesn’t always agree, and it has become politicized.  I don’t need to know, though, whether this proposed 106% increase would cut 5% or 50% of jobs now paying, say, $10 per hour or less, or how much of the effect would be immediate and how much would be spread out over years through attrition, decisions not to grow, and business failures from needing to set prices too high.  I see it as common sense that some number of jobs would go away, a number extremely likely to be substantial. 

Third, demand for even low-paying jobs is great as it is, and making it higher – possibly much higher – will not help anyone.  Even in the last decade’s good times, a Wal-Mart opening near Chicago got 25,000 applications for its 350 supposedly reviled jobs.  When workers needed are too scarce, businesses will generally offer more money anyway, so the effect of a higher minimum would consistently be to force owners to pay more than the market requires.  As before, that may not cause damage if they are unusually profitable, but otherwise it is in effect an extra tax on employers – not what we want when jobs are as scarce as they are. 

Fourth, for many Americans the largest inequality is not between those being paid at or near the minimum wage and others working for more – it is between employed people and those without jobs at all.  To name just one statistic, over 10 million are officially jobless.  Many of them would be delighted to have any offer, even if for less than $15 per hour.  By adding to the ranks of those who have no way to legally support themselves, we would create an even larger gulf within our country.

Fifth, the number of those a higher minimum would actually move out of poverty would be remarkably small.  Twenty-four percent of those at the minimum wage are teenagers, and over 20% more are in their twenties.  Most Americans of those ages are living with employed parents.  Many are also in areas where the cost of living is too high for $15 per hour to allow them to be truly self-supporting, even if, unlike many at food and service positions, they work 40-hour weeks. 

Sixth, forcing the lowest pay rate much higher, even if not the more than doubling the protesters are requesting, would disproportionately hurt businesses in less prosperous areas of the country.  Although many low-paid fast-food workers are in large cities, those in less populated areas, where the cost of living is much lower, would not be allowed to work for less.  There are many American towns and counties where most employees, even those we don’t think of as in the same boat as fast-food workers, earn less than $30,000 per year, and aren’t broke either.  Police officers, teachers, and a variety of office workers, for example, often start under that amount, and with many houses available for, believe it or not, $50,000 or less, they often have no real financial trouble.  If their jobs go away, it would be an unmitigated loss for the higher minimum wage.       

How about other ways of helping those with low income?  There have also been public controversies about unemployment benefits and food stamps.  In those cases, the liberals are right.  When we are maintaining 4.1 million out of work for 27 weeks or more, there is no excuse for not extending those payments to 39 weeks or, preferably, 52, nationwide.  Likewise, food stamps, seldom abusable when delivered through ATM-style cards and redeemed only when identification is presented, only assure that Americans can eat;  while they need not be designed to provide more than the basics, there should never be a question that people who need them should have them.  Yet the minimum wage is not the same thing.  People working can survive.  Confusing them with those not assured of either is destructive.  And if their jobs would go away due to simple business decisions caused by forced higher pay, we would have only ourselves to blame.        

11 comments:

  1. Spoken like a man that has Walmart stock . That is why their soon to be 2 classes of people the rich and poor.

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    1. Thanks for your comments! Actually, I own no Walmart stock, and the two classes I see are those with jobs and those without any at all.

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  2. Adding for inflation the minimum wage should be over $11

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  3. Love to see you lose you job and work as a cashier for Walmart . Good luck paying any of your bills besides putting food on the table ,oh wait.. The government will give you food stamps so the tax payer is subsidizing walmart .

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    1. No, that's erroneous thinking. Just because Walmart hires people, that doesn't mean they have an obligation to pay them more than they do. How about the companies that don't need any workers at all? Are they morally superior to Walmart somehow?

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  4. The fact of the matter is they are unskilled workers. If you do not possses a marketable skill, you are easily replaced by someone who is still willing to work for $7.50.

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    1. If the firm needs a low wage worker to complete their transaction cycle, then the entire enterprise is near valueless without them. Skilled or unskilled, the firm could not exist without their labor and their value is far more than their wage.

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    2. Of course the value to the employer is greater than the cost or the employer would not create that position.

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  5. I think the larger question must be addressed: if you were designing an economy from scratch, would you not link the minimum level for public assistance to the minimum wage, adjusted for local cost of living; or would you think it appropriate to create a class of employment that will be subsidized by tax dollars?

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  6. What if we were to link salaries to profits? Employees should own a stake in "means of production" and surpluses should be shared equally rather than concentrated in the hands of the few. Workers would still be paid $7.50/hour in cash, but would potentially be remunerated several times that amount in stocks based on company profits. Companies making marginal profits would have their relief, and the working poor would gain something much more valuable- income from capital.

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  7. You assume min wage is intended to raise people out of poverty, and it is not. It is intended to reduce the amount of taxpayer provided welfare by requiring employers to pay a living wage. Some marginal businesses will fail if they lose the government wage subsidy for their employees - but that is no reason to continue to prop them up. It is far less costly for an employer to pay a living wage than to have a government welfare system attempt to qualify and pay workers a like amount.

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