Wednesday, April 20, 2016

The Minimum Wage: A Bad 28 Months, and Getting Worse For Now

In December 2013 I published “Six Points Against a Higher Minimum Wage.”  It became one of my most-read Work’s New Age blog posts, with more than 2,000 views to date, and has generated good discussion and healthy controversy.  

Although I do not subscribe to ideology from either the left or the right, one of my fixed principles is supporting the maximum number of American jobs; since forcing organizations to pay people more than they would otherwise can only damage that, I am an archconservative on this issue, against any increase, let alone the up to 106%, to $15.00 per hour, many have been advocating. 

The six reasons I listed address different flaws in a higher minimum, clear but often lacking in publicity:  the incorrect assumption that most or all positions paying less than that are with very profitable companies; the nationwide job dearth, currently 17.8 million as measured by the American Job Shortage Number (AJSN); the already high demand for these opportunities even at current wage levels; the folly of worsening the deepest gap in American employment, that between the low paid and those not paid at all; that, between those not in poverty now and those for whom even $15 per hour would not get them out of it, there are relatively few cases where that rate would make the difference; and the excessive damage it would do to both workers and their employers in poorer areas.  I also noted that my conservatism on this issue did not extend to unemployment benefits or food stamps, which should be extended and made readily available for all in need of them, respectively.  I have also advocated, perhaps paradoxically, a guaranteed citizen’s income, which would end the erroneous idea that those offering work are responsible for the welfare of those they hire, and, if the minimum wage were repealed, would allow for a flowering of pleasant, interesting, or easy, but now illegally-low-paying, positions.

In the two years and four months since, there has been a great deal of activity here.  News stories about protestors who have latched on to specifically $15 per hour, usually but not always in the fast food industry, seem never to end.  Despite inflation since then at 2% annually, 12 states raised their minimums January 1st, with increases from 25 cents to $1 per hour, with current rates now headed by $10 in California and Massachusetts.  Although the press has generally been in favor of such moves or at least neutral toward them, that has changed recently, with unfavorable but apparently straight news stories from the Los Angeles Times (“California minimum wage hike hits L.A. apparel industry: ‘The exodus has begun,’” Shan Li and Natalie Kitroeff, April 15) and Investor’s Business Daily (“Minimum-Wage Hikes Hit Hiring in California, Arkansas,” Jed Graham, March 15), an expository article in CNS News (“California Minimum Wage Could Cost State Taxpayers Billions,” April 13), and anti-increase opinion pieces in The Week (“Democrats have lost their minds over the minimum wage,” Shikha Dalmia, April 11), and, astonishingly enough, The Huffington Post (“Don’t Kid Yourself on the $15 Minimum Wage,” Stephen Adams, April 12).  On the Democratic presidential campaign side, though, candidate Bernie Sanders has consistently been a staunch advocate of that national $15, and his opponent Hillary Clinton actually took criticism about, and as a result walked partially back on, her view that it should be “only” $12.  (To my knowledge, none of the 17 original Republican candidates advocated any minimum wage increase at all.)

These last articles put forth a few objections beyond my original six.  Adams claimed a higher minimum wage would generate “a moral hazard,” with workers at that rate “conned into thinking they don’t need to build up their human capital to earn a decent living.”  I’m not sure this idea is valid, and don’t have sympathy for his additional assertion that it would damage companies by compelling them to raise pay on higher-compensated employees, since above the mandated minimum that would be caused only by simple market forces.  A better cause for concern, suggested by another Graham article, is that employers, when forced to raise wages against their will, may recoup that by taking other benefits, such as education payments and vacation time, away from them. 

How are businesses dealing with giving substantial raises to all of their lowest-paid employees, and what do press sources think they need to do?  Articles in The Washington Post (“As minimum wage marches toward $15, small businesses adapt,” Joyce M. Rosenberg, April 13) and Forbes (“How To Cope With New Minimum-Wage Laws,” Bill Fotsch and John Case, April 12) address this matter, and although one is news reporting and one is couched as advice for entrepreneurs, some strategies in them are similar.  They both name raising prices, cross-training more often, and moving to what we might call a Costco employee model, with higher pay, better benefits, and higher expectations leading to, they hope, better performance, lower turnover, and fewer supervisors.  Other ideas mentioned by only one of the stories were passing work onto customers, such as restaurants requiring them to fill their own coffee cups and sit-down places getting them to bus their own tables fast-food style; teaching employees about the financial needs of the businesses to get more focused efforts; moving work to other states or countries; and installing labor-saving equipment.

The ideas in the above paragraph are the ones we are likely to see as the minimum wage marches up toward, and in some places to, $15 per hour.  The future of work at that rate of pay will belong more and more to those now the best.  Per the CNS News piece, jobs will be disproportionately lost by younger, less educated, and less skilled workers – the people whom liberals wanted to become the prime beneficiaries of mandated higher pay.  We will see again the likes of what happened with warehousemen, who, two generations ago, needed little beyond physical strength, ability to read, and common sense, but now must also be not only more efficient workers but skilled computer users.  And there is no denying that positions will go away – in January, 20 states lost net jobs, of which 7 were among the 8 raising their minimums 50 cents per hour or more, including California, up $1, which broke a streak of 54 consecutive seasonally-adjusted monthly gains.  As above, and per an April 15th Forbes article (“Even The Fight For $15 Now Recognizes The Cost Of A $15 Minimum Wage,” Tim Worstall), there rates to be a backlash.  When August 2018 arrives, despite now-scheduled increases continuing, we may know the impetus behind this effort has peaked.  For now, however, we must deal with the combination of higher minimum wages and a permanent jobs crisis the best we can.  

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