Astounding that 75 percent of Americans support a higher minimum wage

http://triblive.com/mobile/9275185-96/wage-minimum-workers

Even a few Republican politicians (ahem, Ben Carson) struggle with the basic economic concept that when the price of a good is raised, less of it is used.

The minimum wage is predominantly paid to second income earners who need the work to support a family and perhaps most importantly, youths and the unskilled. Putting a price floor inevitably will result in many of these individuals being eliminated from and priced out of the market. Particularly in the case of the young and the unskilled, this will relegate them to a lifetime of earning less than they could have, as that first job can serve as the crucial first rung up the ladder that puts them on a path to rising skills and rising incomes. With no job to be had in the first place due to the market artificially pricing them out, they will be much more likely to struggle and develop dependence on family or even worse, the government (or more correctly, us thr taxpayers). The later and individual can get their first foot on the ladder, the slower they will climb up it.

I am thankful that as a high school and college age kid that I could find employment at a grocer bagging and carrying out groceries, at a feed mill loading feed sacks and fencing material, and at a plumbing company running parts and digging ditches (cue the Caddyshack quote on the world needing ditchdiggers too). These were critical discipline building occupations for me as well as serving as critical funds helping me pay for my college education. The grocery store I worked at had slim 4 percent margins. A too high of a minimum wage would have brought about the necessity to push customers to more self service kiosks for checkout and forcing them to carry out their own groceries, and thus the likely elimination of my job.

Simply because a policy feels good and tugs on the emotional heartstrings of “helping the little guy” does not mean that an economically fallacious policy will actually bring that about. In this case, I would argue that it is perniciously counterproductive to the end goal.

Advertisements

2 thoughts on “Astounding that 75 percent of Americans support a higher minimum wage

  1. Hi Matt,

    Ok so I’ll bite on this one.

    1) What % of Americans do you think knows about, let alone understands, economics 101 on supply and demand? I’d put it at lower than 75%.

    2) Even among economists, there isn’t 100% agreement on this issue. The strict adherence to supply/demand the Friedman and other economists like to propose isn’t rooted in real-life data. As the simplest example, these models assume people act “rationally” (as defined by economists) all the time, when we–and subsequent behavioral economists has “proved”–they don’t.

    3) Large firms like Walmart benefit directly from corporate welfare in that their full-time employees in many cases have to supplement their income on Medicare and food stamps. That allows them to get away with paying a lower wage then they should and distorts the market. If they, and other firms, can’t pay enough for it to worth it for employees, then everything should be automated now or prices should raise.

    4) The anecdote you provide of working in high school/college doesn’t apply as much these days where you have working-age people juggling multiple jobs (and kids often) or seniors working these jobs. Overall employment of high school/college age workers is WAY down over the last 10 years. So there is some credence to the idea of a “living wage” in these respects.

    5) The larger, emotional issue you touch upon is that real wage growth has stagnated since the 1970s; ie. our parents generation was wealthier than we are. And while businesses like retail, to stick with the Walmart example, have slim margins, the managers/owners are millionaires/billionaires, so the issue of income redistribution (which has also skyrocketed since the 1970s) comes into play, even though that’s not directly the issue you’re addressing here.

    Anyway thanks for this piece. It’s fun for me to play devil’s advocate on this. I’m personally somewhere in the middle but perhaps more cynical than you in that I’m not as surprised by the headline you cite 🙂

    -Will

    Liked by 1 person

    1. Will, if I could configure this site to give away a badge for the first true debate response on the blog, you would win it. I will attempt to respond in order:

      1) Point conceded. Perhaps I recognized this fact all along but was still a bit surprised in this era of seemingly every issue cutting 50 percent for and against at the size of the percentage. Maybe I can even be accused of theatrical clickbait.

      2) No doubt that much of the real world decisions made by individuals and companies that hire don’t often align with theoretical models. To me, this makes it all the more important to allow the pricing decisions and market clearing prices set by the invisible hand to prevail rather than an arbitrary floor set by a government. After all, if economists can’t agree, how will a government apparatchik decide the right wage level?

      3) Much to my point above, who decides what is distorting the market and then how is it possible for the government to determine the right wage? What do we lose by ceding the power to the government to make these arbitrary decisions? What unintended consequences can we not possibly foresee when the government wades intrusively into an issue that they can’t possibly truly understand? These are the things that I am concerned with. Also, I would indicate that I am in support of a social safety net for the truly destitute. Unfortunately, the American entitlement system has become far more than that and has become largely a middle class income redistribution scheme. I would argue that this is the true source of the distortion, and the minimum wage will simply do what I propose it will: result in less employment.

      4) Given time and when I am not distracted by four kids and college football, I want to dig into the data here and the causes. I have my hunches that if work has decreased in this bucket it is due to overly subsidized college loans and municipalities enacting their own minimum wages, pricing these groups out of the market. Early data on the Seattle minimum wage of $15 indicates that the result is increased unemployment, particularly in retail and restaurants. Even if there is the need to supplement income, I would argue that enforcing a wage floor is one of the worst instruments to do so, for a lot of the complexities I mention above. Far better to enact direct social safety nets as cash transfers to the truly needy if that is what we decide as a society to do.

      5) I think this is a critical and valid point you make, but I would argue that the more effective antidote to this would be reducing the disincentives to growth of the heavy hand of the regulatory state, a more sensible tax policy with reduced rates alongside eliminated credits and deductions, and better primary education (among other things). Again, I think an enforced wage is a blunt instrument at best, and counterproductive and harmful instrument at worst to accomplish the goal of improving income at the lower rungs.

      You cut through to raise the critical issue: why have incomes stagnated? I hope not to wade into hyperbole, but I think resolving this is supremely important for Americans and protecting the ideals we hold dear and explains the rise of dangerous populists such as Trump and Sanders. Good post. Thanks for chiming in.

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s