How To Make It Seem You're Helping Low-Wage Workers While Actually Killing Their Chances For Employment
Economist Daniel J. Mitchell has blogged a comprehensive piece about the ruinousness of a mandated higher minimum wage.
Businesses go out of business when their wage costs are just too high -- we've seen it in Seattle and other places where there was a mandated raising of the minimum wage. Some cut worker hours to the point where their employees are making $100 or more less per month, due to their work hours being cut with the increased mandated wage. Other businesses, as I've noted here previously, find ways to eliminate employees -- like with iPads or kiosks for ordering.
A bit from Mitchell's piece -- from an article by Black Entertainment Television, about how black teens, especially, get laid off when the minimum wage goes up:
...Economists William Even from Miami University and David Macpherson from Trinity University report that when a state, or the federal government, increases the minimum wage, Black teens are more likely to be laid off. The duo analyzed 600,000 data points... The report focused on 16-to 24-year-old males without a high school diploma and found that for each 10 percent increase in the federal or state minimum wage employment for young Black males decreased 6.5 percent.By contrast, after the same wage boost, employment for white and Hispanic males fell respectively just 2.5 percent and 1.2 percent. The real hit for Black teens occurred, however, in the 21 states that had the federal minimum wage increase in 2007, 2008 and 2009. The findings reveal that while 13,200 Black young adults lost their jobs as a direct result of the recession nearly 40 percent more, a total of 18,500, were fired because of the rise in the federal minimum wage.
Of course, because the sort of people who are more likely to focus on unintended consequences of government meddling are libertarians -- the few and the far between -- pols who pledge to do something about unemployed youth by jacking up the minimum wage tend to increase their popularity in an ultimately fiscally toxic way. (They're there to take the credit for the higher wages -- nowhere to be seen when the restaurants are selling their fixtures.)
Maybe you haven't seen what the labor market really is like. Here's a brief explanation from Andy Puzder when he was CEO of Carl's Jr / Hardees:
And you've never thought of the most basic fact about wages: you cannot legislate an "hour of work" into anything else.
Radwaste at January 16, 2019 3:37 AM
Great example, Raddy.
Amy Alkon at January 16, 2019 5:44 AM
Our McDonalds around here have .touch screen order stations, then you pick up at the counter. So that's, what, 2 to 3 no skill jobs per shift, gone. Burger making machines will roll into use here soon no doubt. Making more people dependent on govt and easy to control, which was no doubt the point all along.
Momof4 at January 16, 2019 5:45 AM
"Making more people dependent on govt and easy to control, which was no doubt the point all along."
Part of this has been true forever.
If you have hired people, you know that there are some folk who cannot be employed for any purpose. They are a risk to themselves and others, even if physically fit, to such an extent that having them on the premises is a guaranteed business-killer.
The problem lies in what to do with these people, who do have enough wit to vote for other people to pay them for no work.
Radwaste at January 16, 2019 5:58 AM
My uncle used to volunteer with a Goodwill job training program. He talked about some of the clients of the program simply being untrainable due to mental handicaps, long-term drug use, etc. The program had lined up local fast food franchise owners willing to hire graduates for minimum wage jobs.
One graduate, born with severe mental handicaps thanks to a drug-addicted mother, went to work for a local McDonald's franchise owner. He tried to make it work, but said when this graduate came back from her break, she needed to be re-instructed on how to mop the floor. She needed constant supervision and it was cheaper, and easier, to hire one person do her job than to need two people to do one job. He couldn't make it work in her case.
Most of the graduates of the program went on to lead productive lives, but some simply could not be helped. How do we, as a society, deal with these folks?
Conan the Grammarian at January 16, 2019 6:36 AM
"Most of the graduates of the program went on to lead productive lives, but some simply could not be helped. How do we, as a society, deal with these folks?"
The only humane thing that can be done is to institutionalize them. People don't want to face that reality, but it is what it is. Being in an institution, even when the care is marginal, is better than turning them out in the street when they don't have the ability to fend for themselves.
Cousin Dave at January 16, 2019 6:41 AM
Getting back to the topic, the other problem with the minimum wage is that it's a motivation killer. Someone with no education, but with drive and self-motivation, is trying to overcome her circumstances and work her way up from the bottom. She gets hired into a semi-skilled job working at minimum wage. This employee is diligent; she shows up for her shifts on time, has a good attitude at work, and she is making good progress on learning the skills of the job. But around her, there are some employees who frequently call in sick, goof off at work, give co-workers and customers an earful of attitude, and aren't interested in doing anything more than the absolute minimum that they can get away with and not be fired.
After six months, our model employee gets a 35 cents per hour raise, and by the end of the year, she is in line for another raise of the same amount. But then, as the year ends, the minimum wage goes up $1 per hour. Now the bad-attitude goof-off are once again making the same wage that she is. What, she asks herself, is the point? Being a goof-off is a lot easier and makes the same money.
This situation lasts until the day that they report to work and find out that they've all been replaced, either by machines or by people in China being paid $2 per day, depending on the job. The goof-offs immediately apply for welfare and get it. Our model employee goes about looking diligently for another job, while trying to subsist on the pittance that unemployment insurance pays. But there are no jobs that don't require a college degree. Even fast-food joints are overwhelmed with applications from people with degrees. What is our model employee supposed to think of our nation and our culture now?
Cousin Dave at January 16, 2019 6:58 AM
That was the same point I made in an earlier thread (yesterday, I believe). Minimum wage advocates think it's as simple as raising everyone making $7.25 to the new minimum. However it's not. That guy making $8.25 knows he's doing better than the minimum and he wants to continue to do better than the minimum when the minimum changes. People keep score.
Conan the Grammarian at January 16, 2019 7:50 AM
That's the conclusion my uncle came to as well.
Our society became anti-institution in the '60s. Political activists like Rosalyn Carter and movies like One Flew Over the Cuckoo's Nest helped us usher in the new and enlightened era of psychotropic drugs that would end the need for those cruel institutions forever. But it didn't work out the way the advocates hoped. Some problems (like Maria) just can't be solved with a pill.
Conan the Grammarian at January 16, 2019 7:55 AM
> The only humane thing that can
> be done is to institutionalize
> them.
Dood.
If I remember the numbers from a Peterson video that I saw last year, about 15% of humanity has an IQ
15% is not a bunch of people in a convenient "institution." It's essentially humanity itself, when you imagine the staffing, management, policing and provisioning of such a project.
I'm almost certainly against it in moral terms as well. 99.4% against it, absolutely. But it's a non-starter, so I'll be forgiven for the six-tenths.
No one's reading this, right? Right.
Crid at January 16, 2019 8:19 AM
An interesting thing I learned awhile back. Many government jobs here have a contract clause that if minimum wage goes up so does their pay rate. Or like my brother's union contract, there is a minimum more than. For example, it is something like the entry position make at least 2.5x minimum wage. Other positions pay is based on the entry pay.
I don't know how wide spread that is.
The Former Banker at January 16, 2019 8:31 AM
My friend from college is manager at a restaurant in Seattle. I was talking to him awhile back and he was complaining about the minimum wage increase -- this probably wasn't even the latest one.
They have found they can't raise prices... They found with the last price increase that customers order less expensive items rather than increase their spending. And they had a few less customers. At that time they had eliminated the kitchen helper position...servers had to do more to prepare dishes. And managers were expected to do more (usually more hours) with no increase in salary.
Sucked for him.
The Former Banker at January 16, 2019 8:39 AM
Sometimes, the alternative to an ugly thing is even uglier.
The entire 15% will not have to be institutionalized. Some will have family to look after them. Charities and big-hearted people will take care of some. And some can be left on their own with supervision - e.g., visiting social workers.
However, some percentage of that 15% simply cannot take care of themselves. My uncle's story about the woman who could not handle doing even simple repetitive tasks comes to mind. Left to her own devices, she's homeless and wandering the streets within a few weeks. Her drug addict mother is dead. Her father is unknown and, without a pool of suspects to DNA test and a legal way to test them, unknowable.
Conan the Grammarian at January 16, 2019 9:08 AM
Nonetheless, I share Crid's concern for letting the government declare people incapable and locking them up.
If government-run institutions are to return, some means of ensuring this is not a way of locking up political or cultural dissidents should be found and enforced.
Conan the Grammarian at January 16, 2019 9:12 AM
When I hire high school boys for yard or snow work, it can be difficult to find them so I pay $10 or $15 or even $20 for cutting my yard. But as the price goes up, sometimes I do it myself so no boy gets an income. I have had 18yr olds that did not know how to rake leaves.
I had a conversation with an otherwise sensible young woman who thinks business should be forced to pay more. I tried to point out that low wage jobs are not supposed to be careers but entry level and that black teens are the ones hurt (per above). She said they should raise it anyway. Her idea that ALL companies need to raise their wages strikes me as so clueless. As if all companies are profitable and just rolling in dough.
A $15/hr wage equates to almost $30,000/yr. Is an 18 yr old with a bad attitude worth that?
cc at January 16, 2019 11:50 AM
The Former Banker "I don't know how wide spread that is."
It's pretty common with state and local gov't based unions. That way they don't have to fight for raises, they get them every few years. In 1938 when the minimum wage was started it was $.25/hr adjusted for inflation it would be. $4.50/hr today. So it has gone up faster than inflation.
It also helps their image, when union people go out and push for higher minimum wages, they look like they are selfless white knights, rather than people asking for a lot more per hour for themselves.
Note this doesn't stop them from asking for or striking for more benefits.
Joe j at January 16, 2019 12:09 PM
Ah, yes, the belief that companies owes people a "living wage" - the socialist dogma that capital owes labor, by default.
Conan the Grammarian at January 16, 2019 12:28 PM
Responses to a few different comments.
"However, some percentage of that 15% simply cannot take care of themselves. My uncle's story about the woman who could not handle doing even simple repetitive tasks comes to mind. "
I'm getting a lesson now on how utterly exhausting it is to try to take care of a grown adult who isn't capable of watching out for their own well-being, or doing basic self-care tasks. It's not like raising a child, because at least you can (more or less) discipline a child. There aren't enough hours in a day. And here's the thing: no matter how hard I try, I fail. There is no path to success. I'm not even sure what success would look like in this context.
"Nonetheless, I share Crid's concern for letting the government declare people incapable and locking them up."
Oh, I do too. One of Uncle Joe's favorite tactics was to declare that since Communism was the perfect philosophy, anyone who had objections was mentally deranged by definition, and needed to be locked up and drugged into submission. I will note, however, that back when we used to have mental institutions, abuse of them was not a widespread problem. Not that it didn't happen, and improvements did need to be made, but the response of dumping all of the patients out on the street not only didn't solve that problem, but it also created a bunch of new problems.
"I don't know how wide spread that is."
The Davis-Bacon Act ensures that it is universal among federal contracts that employ hourly workers.
Cousin Dave at January 16, 2019 1:20 PM
Another problem is location. It might make sense to pay everyone in Seattle $15/hour but it does not make sense to pay that to everyone in Yazoo City, Mississippi where the median household income is $10/hour but still has a 13% unemployment rate.
The only hope for higher employment in the poor parts of the country is to have the wages low enough to make up for the lack of skill and infrastructure.
Curtis at January 16, 2019 1:39 PM
Sorry, the software read the less-than symbol as an html tag.
If I remember the numbers from a Peterson video that I saw last year, about 15% of humanity has an IQ less than 85, and is thus unemployable in any conventional sense.
Crid at January 16, 2019 3:13 PM
Sorry, the software read the less-than symbol as an html tag.
If I remember the numbers from a Peterson video that I saw last year, about 15% of humanity has an IQ less than 85, and is thus unemployable in any conventional sense.
Crid at January 16, 2019 3:13 PM
I don’t share this conclusion. I think it is both worse and better. My guess is that about thirty percent of humanity has an IQ below 85, which by the way is only one standard deviation below the average of 100. But to get someone unemployable, I would say their IQ has to be in the neighborhood of 70 or below.
I was in the unique position several years ago of having access to the IQ data on everyone who worked for me in a Army unit in Germany.
I also have a mother with a Master’s degree in Educational tests and measurements,
Many people with an IQ below 85 can read and write adequately, and can handle many tasks and work situations as well or better than smarter people, who might get bored by too much rote work.
Where their intellect lets them down is almost always in understanding long term consequences of certain behaviors, planning, and especially impulse control. It takes a smart leader to handle these people, and they need to be kept busy. They very easily find ways to get into trouble with either too much money, or too much free time.
Isab at January 16, 2019 8:10 PM
See the J-man (or watch the whole thing). See also Murray, Sailer et al.
Crid at January 16, 2019 8:47 PM
See especially the bit that follows about induction standards.
Last I heard they were floating around ±100, depending on economic conditions.
Crid at January 16, 2019 8:49 PM
When I was an adjunct, you needed to teach about 4 classes per semester over the year to make around 3k a month. Which would be a good job for that kind of money... except...
3 classes was considered full-time enough that they had to give you benefits... so no one ever got assigned 3 classes. We only ever got assigned 2 classes. Which was fine for someone like me who was working part time and on my full time spouse's insurance. But for the single moms trying to make ends meet, it means they had to teach classes at several different universities... all of which was far from each other.
So they still managed to teach 4 classes, but without benefits, and with lots of extra driving and gas money.
They'd have been better off at 4 classes, no benefits, at the same school.
NicoleK at January 17, 2019 1:42 AM
all of which WERE far from each other. I wish we could edit our posts!
NicoleK at January 17, 2019 1:47 AM
And it would have been better for the schools too. But while people like to focus on pay businesses understandably focus on cost and those benefits can be a huge percentage of the cost of employing someone.
For a while I've mused that businesses should tell people what their cost really is. Taxes, benefits, the whole shebang. People love getting benefits when they don't know how much they are spending on them. It might change how people look at things once they know just how much is being spent on things. And then they might say 'No thanks, I'll just take the cash' to a lot of benefits. Back when I had a regular job there were a lot of weird and stupid benefits but while I personally would have preferred to just take the cash we all had to do that together. It's a group thing and you are either all in or all out. Oh well.
Ben at January 17, 2019 6:05 AM
"When I was an adjunct, you needed to teach about 4 classes per semester over the year to make around 3k a month"
When I was a senior in college in 1982, the school asked me if I was interested in teaching an introductory computer science class. They were on a quarter system at the time, and a quarter was 10 weeks. The pay was $400 for the quarter. I did some math and figured that between in-class time, preparing lectures, grading assignments, supervising labs, etc., I was going to spend 9 hours per week on it. That amounted to 80 hours for the quarter, or a rate of $4.45 per hour. That was really low pay for a skilled job, even in 1982 -- I was making about twice that as an intern at a software company. Needless to say, I turned it down.
Cousin Dave at January 17, 2019 6:23 AM
"For a while I've mused that businesses should tell people what their cost really is. "
Boeing used to provide a one-page summary of the P&L to all employees, at the end of the year. It listed gross revenues, expenses (broken out into wages, taxes, operational costs, capital costs, and miscellaneous accounting charges), net profit, and distributions to stockholders. This was further broken out into the two major divisions, Commercial Airplanes and Defense & Space. It was interesting to observe that, regardless of business ups and downs, D&S's profit margin was consistently around 7%. I asked around and found out that the way the nature of defense contracting tends to drive all contractors towards that profit number.
Cousin Dave at January 17, 2019 6:30 AM
See the J-man (or watch the whole thing). See also Murray, Sailer et al.
Crid at January 16, 2019 8:47 PM
Sorry Crid, I just don’t trust the modern numbers coming out of the Educational testing establishment.
The civilian data has been heavily cooked by people with a vested interest in higher numbers.
Murray I have read. His data for sub Saharan Africa is truely shocking.
An 85 IQ as tested in 1980 is on the low end of average on the bell curve. Many of those people were in the Army in 1980. We also had many left over from Macnamara’s hundred thousand who were well below that.
Isab at January 17, 2019 6:37 AM
A problem I have with the "fight for $15" is that even in urban markets the starting wage for a college grad in a good job is not much over $15/hr ($30,000/yr).
There are jobs for those who have no experience, poor work habits, not bright, not motivated, but such jobs should not be assumed to be a wage that can support a family. Should a greeter at Walmart be able to afford an SUV? The work world is based on working your way up.
People should focus on asking why it costs so much in some urban markets. The reason is often that the city won't let anyone build more housing. There are often thousands of abandoned buildings and empty lots in a city. The NIMBY attitude is so strong, especially with planning boards, that the land sits vacant. There are also all sorts of occupational licensing restrictions, prohibitions on street vendors, a war on Uber, etc that keep the poor from getting jobs or cheap housing. And then the blame is put on employers for not paying more.
cc at January 17, 2019 8:27 AM
Another thing I see that hurts the low-wage worker is that government entities are unfriendly to the gig economy (AirBnB, Uber, Taskrabbit). They want only big companies that can give political donations and that they can force to pay benefits to full time workers. To take an example, many Uber drivers are part-time or work for a while (not a career). It is a great gig to fill in your $ if you don't have a job. Many cities have banned it or restricted it or in Cali declared that drivers are employees rather than contractors and need to get benefits (as if benefits fell from the sky).
cc at January 17, 2019 8:42 AM
The problem is you're mandating a floor for the pay rate, but not placing a floor under the value the employee brings to the table.
bw1 at January 17, 2019 7:58 PM
bw1: When 19th Century Progressives proposed the minimum wage (and got it passed in several states), their intention was to place a floor under the value the employee brings to the table - and make those they considered inferior intellectually or racially unemployable. Their hope was that if such people couldn't get a job to support a family, they would not have children.
It was supposed to be a gentler form of eugenics than forcible sterilization...
markm at January 19, 2019 7:45 AM
"Their hope was that if such people couldn't get a job to support a family, they would not have children."
Even in this era of cheap birth control, that's a pipe dream.
bw1 at February 16, 2019 5:47 PM
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