Sunday, June 24, 2012

The minimum wage is bad for the unskilled and unemployed, period.

Yesterday I responded to the claims that Huffington Post Blogger Elizabeth Parisian made supporting increases in the minimum wage. Hopefully it is clear that there is no sound theory or evidence showing that increasing the minimum wage, all else equal, lead to gains in employment.

And because there is no way to carry out an experiment to see if raising the minimum wage lowers employment, empirical evidence often concludes that increases in the minimum wage have only a small or negligible effect on employment.

But what the empirical evidence never takes into account is the unseen unemployed. That is, it is not how many people are let go when the min. wage is increased, but how many people who are never hired because of it. If a small business owner would like to hire another person or two but can't afford it at $9.00/hr while they could afford it at $6.00/hr, those two people without jobs willing to work at $6.00/hr are not counted as casualties of the min. wage. But they should be.

It is the unseen unemployed that get screwed by the min. wage, not the people who already have jobs. And it is precisely those without the jobs, the lowest skilled among us, who are the most vulnerable. Why should someone with no skills be prohibited from offering their less skilled labor for a wage that is agreeable to both them and their employer? If my labor is not worth $9.00/hr because I have never had a job and thus have not proven capable of holding one yet, why can't I agree to work for a lower wage in the hopes that my skills will develop and then I will be able to earn that higher wage?

Liberals think they are protecting workers with their calls for a higher min. wage, but all they are really doing is preventing the unskilled from gaining skills. Why hire some 16 yr. old kid from the ghetto at $9.00/hr when I can hire a high school graduate at that same rate? Perhaps I would be willing to hire that kid at $6.50/hr to see how they could handle the job and they would be willing to work at that rate to get their foot in the door. But people like Ms. Parisian say that the kind of bargaining needs to be outlawed. Screw that kid. If he can't find a job at $9.00/hr he is better off running the streets and collecting gov't handouts. With the increases in the min. wage is it any wonder that youth unemployment is at an all time high? From the U.S. Youth Chamber of Commerce "The percentages of American 16- to 19-year-olds who are employed have fallen to below 26 percent, a record low.”

This is what raising the min. wage to above market levels does. It creates a dead weight loss and prevents potential employees from successfully agreeing to a wage with employers that allows them to get their foot in the door and gain skills. The min. wage cannot ever be a living wage because not every person who works needs a living wage, nor is worth one. Kids living at home with their parents, retired people looking for part time work, housewives looking for part time work while the husband is the primary earner, or vice-verse, do not need a living wage and they are being forced out of the workforce by liberals looking down on them from their cozy jobs, "protecting" them.

So Ms. Parisian, Nancy Pelosi, Senator Harkin, and everyone else crying about the min. wage, where is your sympathy for them?
Also, this quote by Chris Rock that Ms. Parisian finds so amusing "I used to work at McDonald's making minimum wage. You know what that means when someone pays you minimum wage? You know what your boss is trying to say? It's like, 'Hey, [if] I could pay you less, I would, but it's against the law."  is stupid. Of course they want to pay you less. They would like you to work for free. And you want to earn as much as possible. That is how markets work. But if Mr. Rock really felt like he was being underpaid he could have quit and found a different job. My guess is that he was very unskilled at the time and if anything he was being overpaid.

1 comment:

  1. I think the biggest point about this post is that a minimum wage sets the ground for a lower employment levels across other groups. That statement is irrefutable; it's theoretically sound. I think there are other issues with this, though. I have to think about this for a while, and respond appropriately when I can think through it clearly. I definitely agree with you, but I also think it's important to be able to give people a living wage above subsistence level. Yet, there's no clear "moral" answer here. Do we want people with low paying jobs to earn a little more? Or do we want more people in lower paying jobs? Those are two suboptimal solutions. The appropriate solution would be to have lots of people making a lot of money, but that's not how it works. I don't think it's necessarily a skill thing. The stuff I learned at my low paying jobs didn't help with what I do now; pushing carts at Jewel-Osco is not very similar to statistics. I think it was valuable in some sense, but I don't think the skills gained at low paying jobs really helped. On the other hand, the skills from my current job DO help. So, there's a bigger issue at hand. How do we get kids from the ghetto into jobs that can give them marketable skills and that can train them so they can have those higher wages? Education. Education helps, but what about the kids in the ghetto that aren't lucky enough to be born in the upper tier of the test score distribution? That's where my concern is.