The minimum wage is almost always a matter of controversy. Right now, people are pushing for a $15 per hour minimum wage. Current federal law requires $7.25 per hour for non-tipped jobs, with many states having higher levels. So, why did the New York Times argue for a removal of the minimum wage altogether? Here's their logic:

An increase in the minimum wage...would restore the purchasing power of bottom-tier wages. It would also permit a minimum-wage breadwinner to earn almost enough to keep a family of three above the official poverty line. There are catches, however. It would increase employers' incentives to evade the law, expanding the underground economy. More important, it would increase unemployment: Raise the legal minimum price of labor above the productivity of the least skilled workers and fewer will be hired.

If a higher minimum means fewer jobs, why does it remain on the agenda of some liberals? A higher minimum would undoubtedly raise the living standard of the majority of low-wage workers who could keep their jobs. That gain, it is argued, would justify the sacrifice of the minority who became unemployable. The argument isn't convincing. Those at greatest risk from a higher minimum would be young, poor workers, who already face formidable barriers to getting and keeping jobs.

So, there it is. A higher minimum wage means fewer jobs for the unskilled people. How do you expect them to gain skills with no jobs in which to be trained? We even have a crack down on internships (which are geared towards the highest skilled and highest educated of our young people) to require payment for those jobs, except under the strictest of circumstances.

One thing that proponents of a higher minimum wage often forget is that the purpose of a job is to make money for the boss, not to provide an income for someone. If the boss can't make money off an employee's labor, it's not worth the hassle to hire the person.

I, for example, am a Solopreneur, so I have no employees. However, I have lots of people who work for me. Take for instance, my cleaning lady. She's fabulous. We live in a high cost of living area, and I want the best cleaning lady around, so I pay her an above market wage. However, what she earns is still less than I can earn in the time that she's cleaning my house. If she doubled her rates, it wouldn't be worth it to me to pay her.

I also have a web designer, who keeps my website running smoothly. I have an accountant who does my nightmare taxes. (Well, I have two accountants, because as a US citizen living abroad, I'm responsible for taxes in two countries. The US and Eritrea are the only countries in the world that tax based on citizenship rather than the location where the money is earned.)

While I pay my accountants more per hour than I earn, they can do my taxes far faster than I could. If I did them myself, it would take me a tremendous amount of time to understand the complicated tax codes-and the Swiss one is in German (which I speak, but not to tax level fluency). It's worth the money to me to hire them. Plus, my lack of knowledge would likely result in mistakes and, therefore, fines.

All of these people earn more than minimum wage because it's to my advantage to hire them.

It works exactly the same in every business-even fast food. Some fast food restaurants are replacing cashiers with computers. It's not just because it's cool and high tech. It's because a computer is an investment that won't ask for a raise. Sure, with a $7.25 minimum wage, it's not worth it to most fast food restaurants to install expensive computer equipment, but raise that to $15 an hour and you'll see more computers and less employees.

Who works fast food? Well, in my experience, it tends to be the young-high school and college aged people, and people returning to the workforce-middle aged and older women who have been stay at home moms and want to get back to work, but have no current resume. What you don't often see is someone who has been working the cash register for 20 years. Most people use fast food jobs as stepping stones to bigger and better and more highly paid jobs. A push to higher minimum wages will reduce the number of those jobs. Which means that instead of the high school dropout who really, really, really needs training and income, the jobs will go to those same people who are competing for the internships. The more highly educated.

If you want to see people succeed, allowing them to take low end jobs allows that kind of success.

Now, you may be thinking, "advocating for a $0.00 minimum wage doesn't seem like something the New York Times would do, you're right. It's absolutely something that they did do. If you'll notice the three dots in the quote, those are ellipses which show a part missing. that missing phrase? "to say, $4.35." This article was from 1987. They later go on to praise Ronald Reagan.

The New York Times currently wants a $15 minimum wage. Why? Have the laws of economics changed since 1987? Of course not. What's changed is politics. The $15 minimum wage is politically popular, even if it won't help the very people it claims to help. It makes us all feel good. But, what good is a $15 an hour job if those jobs have been taken over by computers or done away with altogether?

Wages will rise on their own. The more people who are employed, the faster wages will rise as companies have to compete for the best employees. Force wages up artificially and you'll see the elimination of the easiest jobs. That's the last thing our economy needs.

(Thanks to Overlawyered for finding the old NYT article.)

 

 

Published on: Dec 29, 2015