I remember those grueling teen years flipping burgers, scanning groceries, and taking in donations at the Goodwill.
I also remember those infrequent, but very rewarding, pay raises: 25 cents after three months; a dollar increase after a year or two; a few more dollars once promoted and so on.
Being a wage earner was all I knew, was what everyone in my lower middle-class neighborhood was accustomed to. Working for the local post office or as a “sanitation engineer” at Yale Hospital were among the types of jobs people aspired to.
401k plans, rollovers, dividends, quarterly earnings – long the province of the white-collar class accustomed to having money work for them – were terms I only encountered after landing my first “real” job in corporate America.
As the minimum wage again becomes apart of the national conversation on how to close the gap between the rich and the poor I am reminded of the great disconnect between the wage earning class I grew up in and the dividend-earning, high-powered title position classes governing over the economic livelihood of the country at large.
The most recent solution from our virtuous, prudent politicians: increase the minimum wage to a “livable wage.” The number that seems universally agreed upon: $15 an hour.
And from I can tell after reading certain proposals, it will be phased-in process. In my state, CT, workers won’t get $15 until 2024.
Working a minimum-wage job, of course, is not bad in and of itself. Millions of teens have worked countless minimum-wage jobs as a sort of rite-of-passage. You learn a thing about showing up on time, responsibility, interacting with people, dealing with difficult customers, and so on. It teaches you a thing or two about the real world.
However, while these minimum wage jobs serve as temporary transition points for many, more recently they are becoming careers for many others. Thus, the fierce debate about increasing the minimum wage. People are relying on these jobs to provide for kids and so forth.
My first series of questions: why is nobody—neither political party–asking why grown adults are in this place to begin with—working fast-food jobs as default careers? Why is “food service worker” one of the most common occupations in America (with retail clerk right up there)? Why is it that mostly low-income minorities tend to be relegated to these types of jobs? Why are politicians essentially promising that once the minimum wage goes up to $15 that all will be well when, in fact, that wage is still far below the yearly cost of living in many states?
I will touch on these things throughout this article. For now, please understand this: minimum wage increases do not address the underlying issues of income inequality. In fact, government-mandated minimum wages harm the very people they are intended to help.
Here are my eight reasons why the increasing the minimum wage is a bad economic policy:
The Minimum Wage is Not a Livable Wage and is Not a Market Wage
A quick analysis at the Economic Policy Institute website will easily demonstrate how below the cost of living the minimum wage actually is. In coastal cities especially where it is becoming more very costly to live the minimum wage is likely to put you below the poverty line. So why did politicians choose $15 as the golden wage to make everything better?
Here’s where things become trickier for everyone else. If millions of people are trying to get by on the minimum wage – and still below the cost of living – how do they pay for a home, reliable transportation, day care, health care, save for a child’s education, among other important expenses?
This is where the Walmarts and Amazons of the world benefit; taxpayers essentially subsidize their workers’ cost of living. Taxpayer dollars that could otherwise be spent on programs to benefit people in other ways instead pick up the tab for corporations that can get away with paying their employees a pittance.
Never mind teaching the necessary skills needed to command a salary in keeping with the cost of living. In a free open economy people should be empowered to develop their innate talents so they are able to compete and have a corresponding market value.
People will pay far above the minimum wage for a service or product that merits it. Wage earners – and the industrial-production-styled school systems they routinely graduate from – have been conditioned to do one thing: earn a wage from the man. They come to believe (no fault of their own) that they need more money an hour when a better understanding of economics and market competition is really needed.
Raising Wages Without Raising Productivity Will Create More Unemployment
If wages are artificially increased but productivity remains the same employers are going to look for ways to cut down on other costs so they can maintain profits at the same level. Those other costs are, of course, workers and everything that comes with them. Expect hours, overtime, and benefits to decrease when employers are paying a couple of extra dollars an hour to an employee with the same level of output. A Forbes article summarized it like this:
“Once a minimum wage is passed, the cost of producing goods made by unskilled labor will increase. This in turn means that fewer units can be made and that the price of the good itself will also increase. Because of the increased price, fewer units will be sold – which ultimately results in fewer workers being hired. As the price of labor goes up, producers will have an incentive to use machines to replace labor.”
In fact, as the Forbes article above explains, such replacements are already underway. Take a look at this “Robot Hamburger.” Earlier examples of this robot are the many self-serve check out lines in many stores; Amazon is leading the way with its Amazon Go stores; Self-driving trucks are all the rage, etc.
Harms the poor and unemployed most by making first jobs more difficult
There was a time when you would meet a gas station attendant when you pulled in for gas, probably the only time when people from different class backgrounds interacted if only for a brief moment. These jobs are few and far between today. Gas stations have automated most of their functions.
Think of other first jobs for many young minority men. If most of the first jobs available to them are corporate food chains or small shops closer to home – and these places are looking for the best and brightest so they can get the best bang for their book – are they going to take the 16 year-old with no experience or the 25 year-old with five years of experience?
This is an example of where the most vulnerable suffer. If you are at the bottom of the economic ladder, live in an economically depressed area, and don’t have much social capital to rely on, how do you land your first job? Most chains are franchised-owned. You need to know someone to get in. Most restaurants are family-owned. They will likely be more selective and very cost-conscious.
There aren’t many training programs for new workers needing an opportunity, especially not when that new worker comes with a higher price tag and might be more of a risk, and less of an asset.
Eliminates the Possibility of Mutually Beneficial Work Relationships
To further my point about the young man looking for a first job, I argue that essentially it is not a “minimum wage” that he needs but SKILL-building opportunities. What good is it to land a minimum wage job if what you do and learn is virtually meaningless outside of your set schedule. Might it better for young men – even below the legal age to work – from disadvantaged backgrounds to get more informal opportunities regardless of pay?
What I am arguing for is a free and open system where people voluntarily enter into agreements with people and get paid for their services. If an employer is squeezing by and cannot afford to pay, say, $15 an hour, but can afford to pay $10, should he be entitled to that if he has a willing employee? It’s not a popular argument but I believe it holds some merit.
Say this person is able to work temporarily here, get some valuable experience, make some important contacts, get access to critical mentoring, and, while working, say he or she supplements this work experience by getting an important certification, taking a college course, building a blog, something, anything, to become more marketable and command a higher wage going forward. In the end, I believe both parties benefit. One gets needed help; the other receives skills, recommendations, etc.
I’ll give an example of myself. When I was fresh out of college and looking for work in my field and nothing seemed forthcoming I would have jumped at the opportunity to publish articles for a blog, a local paper, etc. because in doing so I would be building work experience and furthering my talent. Okay, so maybe I earn a few crumbs, but I’m networking along the way, figuring myself out, and preparing myself for a better opportunity in the near future.
Please continue on to Part 2.