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Minimum Wage, Maximum BS

The Boston Globe has one columnist who can routinely find the absolute dumbest position on pretty much any issue and run it right into the ground. That gentleman is Derrick Z. Jackson, and he gives knee-jerk liberal idiots a bad name.

Today's exercise in silliness involves Mr. Jackson and the minimum wage. Apparently during the last Democratic presidential debate, the candidates were asked if they would serve as president for four years at minimum wage. Senators Biden and Dodd declined.

On the face of it, it's absurd. Both Biden and Dodd have literally decades of experience in their current jobs, and are quite successful at it. (Politics aside, the proof of this is that they still have those jobs, having been re-elected by their constituents many times over.)

But Jackson is also using the fallacy that one can extrapolate the minimum wage into an annual income to get a fair reflection of what it's like to be poor. It just doesn't hold up.

For some time now, I've asked if anyone -- especially those who claim to be so much smarter than I am about economics -- to show me just how many full-time workers actually make just the minimum wage for an entire calendar year. It took Falze to unearth a study that indirectly shows that answer:

About 450,000.

Here are a few unpleasant truths about minimum-wage workers and jobs:

1) The workers simply don't have the leverage to demand higher pay. This can be from lack of experience, lack of skills, lack of employment history, or a bad employment history. But these can all be corrected in relatively short order -- if the worker is willing to work at it.

2) The jobs tend to be very undemanding, requiring little or no skills. Hence, the supply of workers who can perform them is very great. Simple supply and demand says that when there are more workers available than are needed for the job, the value of the job (as measured by the salary) goes down.

3) There is already a substantial social safety net. People who make minimum wage only qualify for a hell of a lot of public assistance.

This is a self-correcting system. Let's take an example of a job that is often cited by the left: a janitor at Wal-Mart.

Just what demands are there to perform the job? Let's see: show up on time, push a mop for eight hours. That's the kind of thing that pretty much anyone can do. So the theoretical pool of potential employees is very large.

But who is willing to to that job for minimum wage? A vast majority of those who can meet those requirements would not be willing. So the supply of workers has been cut drastically. Eventually, the supply will be so low that Wal-Mart will have to change the equation -- and offer more money, until the supply of applicants is sufficient to meet their needs.

Now we have a Wal-Mart with, say, a dozen janitors, all making minimum wage. A few months pass. Most of the janitors have done their job well, while a few have not. At that point, Wal-Mart will look at the situation with a cold eye and say "one janitor just isn't doing his job, so we'll fire him and replace him. Another three are doing adequately, so we'll keep them -- we remember how much work and money goes into hiring someone new. We just won't give them raises, as a way of telling them to 'shape up or ship out.' Seven more are doing fine, so we'll give them raises to keep them happy and not looking for another job. And one gal is doing so well, we'll give her a raise and a promotion so she can help train the new worker and lean on those mediocre ones to do better."

A few more months pass. The new guy is hired and goes through his first review. The probationary ones (the ones who didn't get raises the first time around) are either given raises or let go. And the good ones are given another raise and/or promoted.

Six months have passed since the original dozen janitors were hired -- and not a single one of them is still being paid minimum wage.

(I don't know anything about Wal-Mart's actual personnel policies, but the 90-day/180-day review calendars are fairly standard in most businesses. Substitute 30-day/90-day periods if you prefer -- the point remains the same.)

The vast majority of minimum-wage earners are NOT the sole support of a family. They are young people, fresh to the job market. They are people working a second job for additional money. They are "transitional" workers, taking what jobs they can to pay the bills until their situation improves. They are retirees, staying active and supplementing their income.

Back to that study Falze cited: the total number of people who earn minimum wage for an entire year is roughly 450,000, of a workforce of about 135,000,000. One third of one percent. One in three hundred workers.

Let me repeat that: 0.333...%.

To raise the minimum wage across the board is the equivalent of killing a cockroach with a howitzer. Sure, it'll take care of the problem, but would you want to live in the now-cockroach-free crater?

Would I want to work for minimum wage? Hell, no. I currently make well over double that at the Day Job, and I've earned that by proving my worth to my employer over and over, for nigh on a decade. Accordingly, they've rewarded me with raises and promotions. Admittedly, those raises have been decidedly skimpy on occasion and I've avoided certain promotions because I simply don't want to deal with the headaches that come from being part of management in this company, but I've stuck with them and they've stuck with me.

But if I had no other choice, I would take that damned minimum-wage job and work my ass off at it -- because I know that I'm better than that, and I won't be at that rate for long.

Setting aside ego and just going on statistics, I have a 299 in 300 chance of being right.

But I'd like Mr. Jackson to conduct his own little experiment: why doesn't he declare what would be a fair minimum wage, and then spend a year working for the Globe on just that amount of money? I think it would result in some truly great columns, discussing what he considers the "absolute minimum" for someone to earn, and then describing how he lives on it.

Considering the economic status of the Boston Globe (and its owner, the New York Times), it would certainly be beneficial to them as well. They could keep on a few of their lower-paid employees on what they save in paying Mr. Jackson.

(Update: final two paragraphs added and minor errors corrected)


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Comments (30)

JT, why would you want to i... (Below threshold)
WildWillie:

JT, why would you want to interject the honest truth into this debate. The only reason it sounds good to raise the minimum wage is because the democrats love to create an issue that doesn't exist, throw in emotional blackmail, and then get their way so they can have a party in the Washington, D.C. mall about how they corrected a great wrong. Only the left buys that story. In reality, they had to attach it to the Iraq appropriation bill, or it would not have passed. Wow. The democrats drive to lower expectations is amazing. ww

Jay Tea:One flaw w... (Below threshold)
pennywit:

Jay Tea:

One flaw with your example: You're assuming lawful behavior on Wal-Mart's part. Recall, if you will, that it wasn't too long ago that Wal-Mart got in trouble for using a janitorial subcontractor that, in turn, was employing illegal immigrants as janitors. And I'm not entirely sure of those janitors' wages.

--|PW|--

My youngest son, who has be... (Below threshold)
Mark L:

My youngest son, who has been working at a grocery store for all of nine weeks, got a 17% raise on Tuesday. That is the day the first minimum wage hike kicked in.

My son is 16. This is his first job. Virtually everyone else who is receiving minimum wage at that store is also under 20. Nor is he living on his salary. He is still living at home, with most of the other minimum-wage workers at the store. (Actually, I suspect that many of those commenters that have claimed they needed minimum wage jobs to survive probably still live with their parents, even if they are a long way from their teens.)


While he is grateful for the money, he cannot really say that his increase in productivity justifies it. He also worries about friends of his age that do not have jobs. Since wages just rose 17% for his employer, his employer will have to hire fewer workers if prices are to remain competitive.

I explained to him that aspect of minimum wage hikes are a feature, not a bug to the Democrats supporting them. Making fewer jobs available makes people more dependent upon government largess. Making everyone thrall to the government is a key part of the Democrats' agenda.

If there are so few people ... (Below threshold)
rob:

If there are so few people working for minimum wage, why not just raise it? according to J, the economic impact would be minimal on employers, it would create some separation between low wage earners and their qualifying for government assistance and it would shut the Democrats up.

Cascade effect, rob. A lot ... (Below threshold)

Cascade effect, rob. A lot -- a LOT -- of unions have their contracts written so that they make a multiple of minimum wage. Jack the bottom line, the top line skyrockets.

Also, the people who make minimum wage for a portion of the year will be affected. My piece only talked about those who make it for the full year.

J.

Florida has instituted 3 mi... (Below threshold)

Florida has instituted 3 minimum wage hikes in 18 months. The first one raised our overall payroll 33% and it nearly destroyed the business. All our employees were already making well over the base minimum except tipped employees. We were starting cooks at $10 hr, out of the box, when the minimum was $6.15. So we couldn't exactly be called slave-drivers.

I've heard that union wages are inextricably tied to the national minimum, but many do not know that tipped employees wages are too. If the base minimum goes up so does that of the tipped employees. I've been in this business for 35 years and have known that a large percentage of waiters and bartenders earn as much or more than the managers through tips. I know. I was one of them. I raised two children as a single parent on a bartender's tips/wages - without government assistance. Yet because the base minimum went up, so did theirs.

Because our staff is 80% tipped employees, our payroll shot up considerably. I've heard people say, "So you dish out another $.50 an hour for someone. So what." This is sheer ignorance speaking. That's not all there is. All the taxes go up too: matching SS/MC, SUI, FUTA, W/C.

The fact is, in order to compensate for the increase in payroll we had no choice but to raise our prices which also raised the tip average for these employees, so they got double raises when they were already making quite comfortable sums of money, and we're less competitive with the chain restaurants than we were.

Eighteen months ago our payroll was around $22k bi-weekly. It's now often over $30k.

And people wonder why a hamburger in a full service restaurant is $9.

Seven more are doi... (Below threshold)
jpe:
Seven more are doing fine, so we'll give them raises to keep them happy and not looking for another job.

I'm not sure why they'd do that. As you note, the potential applicant pool is enormous: anyone can push a mop for eight hours. It'd probably be better to either fire the janitors to avoid a raise (it's not like there are huge training costs associated with new janitors) or otherwise find ways to keep their wages low.

That's what I'd think an economically rational person would do. And I'd expect that's exactly what Wal-Mart does.

Since wages just rose 17% for his employer, his employer will have to hire fewer workers if prices are to remain competitive.

Unless the economy is a dynamic system, and that extra cash is cycled back into the economy, creating added demand with which employers can hire more people. This is what people say about Washington State: higher minimum wages with little detrimental effect overall. Despite being liberal, I'm very sympathetic to conservative arguments on minimum wage (my pops is a d/b/a, so I understand the employer's perspective and dilemma), so I view the Wash State claims with healthy skepticism. I've searched for counter studies on Wash State to no avail, so if anyone has any info on that, I'd be interested.

Don't worry Oyster you'll ... (Below threshold)
Mark:

Don't worry Oyster you'll have Goverment sponsered health care when you have your heart attack!

Oyster's dead on with respe... (Below threshold)

Oyster's dead on with respect to the cascade effect of costs due to minimum wage increases on the businesses that have substantial numbers of minimum wage employees - but that's not all. For a small business that relies on minimum wage workers, the impact can be pretty significant (see this tool to play with the numbers for yourself if you were a small business owner.)

For the most part, people i... (Below threshold)
Gianni:

For the most part, people in the US get paid what they are worth.

Think you deserve a raise, great either incent your employer to give you on, OR

Its not hard to be an above avg emloyee, but so mnay just do the bare minimum.

I made $5.59 an hr in a factory in 1979. I didnt want to go to college right out of HS, so I worked for a yr, and then I entered a 'contest' for lack of a better where a handful of people got full tuition paid by the company. That schooling help jump my pay up over $10 by 1982. (And yes, I was still living with my parents, just like most of todays min wage workers)

There are always to advance/excel/succeed, but a libbie would rather sit back and let the DNC do it. I personally dont know or witness many on the left that actually believe and pursue self-relaince.

Shameful isnt it.

Back to that study... (Below threshold)
jpe:
Back to that study Falze cited: the total number of people who earn minimum wage for an entire year is roughly 450,000, of a workforce of about 135,000,000.

That number isn't so helpful, since it's the number of people on the federal minimum wage, and a substantial majority of states have higher min wages.

Its like all those rediclou... (Below threshold)
spurwing plover:

Its like all those rediclous comments made by the liberals when the clinton gun control ended in 2004 all those rediclous comments claiming a higher murder and blow flowing throught the streets typical of liberal halfwits

Anyone against raising the ... (Below threshold)

Anyone against raising the minimum wage is hereby declared guilty of violating the constitutional rights of young people to get new Playstations.

jpe, if the minimum wage do... (Below threshold)
C-C-G Author Profile Page:

jpe, if the minimum wage doesn't affect prices or hiring, why stop at $8 or $9 an hour? Why not $20 an hour? Why not $50 an hour?

A $50 min wage isn't under ... (Below threshold)
jpe:

A $50 min wage isn't under discussion. A $7-8 one is. The argument is made that that would significant negative econ impacts, so one can point to the experience of Washington state as a counterexample.

The effect of a 50/hr wage is probably interesting for academics, but is neither here nor there for present purposes.

Nice spin, jpe. 6 out of 10... (Below threshold)
C-C-G Author Profile Page:

Nice spin, jpe. 6 out of 10.

The question is, why isn't a $50 minimum wage being considered? That would provide lots of money for the working poor, wouldn't it?

If you consider that the Pr... (Below threshold)

If you consider that the President is basically on the job 24/7 minimum wage isn't that bad.

The first 40 hours of ever week at $5.85/hour pays $12,168 for the year.

The remaining 12,500 hours of the year at time and a half $8.775 pay $122,031 for a yearly gross income of $122,031.

As President you don't pay for food, shelter, transportation or just about anything else so $122k isn't a bad deal. That's pretty close to $500k for a four year term.

And to Jay Tea's point if the sitting President is good enough to get re-elected he could get a raise for the second term.

Good question CCG. Where in... (Below threshold)

Good question CCG. Where in the Constitution is Congress given the power to tell a private business how much it has to pay an employee?

While the Libs are at it, why don't they institute a maximum wage? They continue to tell us how much they hate the rich. Therefore, if Congress can pass a law setting the floor, why doesn't it pass a law setting the ceiling?

Therefore, if Cong... (Below threshold)
jpe:
Therefore, if Congress can pass a law setting the floor, why doesn't it pass a law setting the ceiling?

We had something very close to this during WWII, when marginal rates were over 90%. That enabled us to pay for the war as opposed to shift the tax burden to future generations.

Actually this BS law will r... (Below threshold)
scrapiron Author Profile Page:

Actually this BS law will result in pay cuts for more people than were effected by the raise in minimum wage. Currently anyone that goes to work for minimum wage gets a pay raise (if they're worth spit) every few weeks until the are paid 50% (most non skilled jobs pay $8-10 per hour) above minimum wage. Now the business owners will be forced to delay the raises. Result, more people will make less money than ever before. This was just another snow job by the retarded democrats in congress that was bought by the retarded American public.

jpe, remember what happened... (Below threshold)
C-C-G Author Profile Page:

jpe, remember what happened when Jimmah Cahtah was President? In 1979, the top bracket was 70%. We also had this little thing called "stagflation," a combination of stagnation and inflation. Cahtah also introduced the "misery index."

Reagan took office, reduced tax rates, and the economy boomed. GDP rose at approximately 3.4% per year, unemployment dropped, inflation slowed drastically, and the terms "stagflation" and "misery index" largely disappeared from our vocabulary.

Also, it's worth remembering that the darling of the left, the late John F. Kennedy, lowered taxes. Funny how lefties don't mention that very often.

Jay sez..."Simple ... (Below threshold)
bill:

Jay sez...

"Simple supply and demand says that when there are more workers available than are needed for the job, the value of the job (as measured by the salary) goes down."

Well...no, that is why it is called a "minimum" wage, the salary doesn't go down...hence the problem.

Just my point, bill... "sim... (Below threshold)

Just my point, bill... "simple" supply and demand says that. Minimum wage means it isn't simple.

J.

As Jay points out, this is ... (Below threshold)
Knightbrigade:

As Jay points out, this is just one topic that Derrick Z. Jackson has wrong.

I have read his crap for years, it got so bad I had to cancel my subscription. I refused to spend any money for such nonsense.

Jackson has a chip on his shoulder.
Whether it's poor victims of minimum wage, poor African-American victims of numerous circumstances, poor gang victims of big bad guns, etc.

The Globe should create some kind of podcast for his columns, so we can hear the violin play while he narrates it.

JpeThat's not the ... (Below threshold)

Jpe

That's not the way it worked out. The percentage of debt relative to total GDP in WWII was astronomical. See this:

http://www.optimist123.com/optimist/2005/01/national_debt_b.html

FDR and Congress did burden future generations , just as Reagan's victory in the Cold War was expensive for us today.

Indeed Hugh, after all, tha... (Below threshold)

Indeed Hugh, after all, that's what the war bonds were. Debt.

Robin RobertsThanks.... (Below threshold)

Robin Roberts
Thanks.
You probably recall that Clint Eastwood made a gripping movie that included the War Bond drive as a subplot...Flags of Our Fathers.

Interesting point, scrapiro... (Below threshold)
kim:

Interesting point, scrapiron, at 1:06.
======================

The BLS data on numbers of ... (Below threshold)
Phaedrus:

The BLS data on numbers of persons earning the minimum wage nationally is very useful to provide the overall perspective that very few persons make at or below minimum wage. I wonder if there is s ource for minimum wage workers by state? The BLS minimum wage report does not provide such a breakdown.

A side note, the recently elected democrat from Kansas who upset a longtime conservative republican is already under fire as a target for next years election. Her first ad in response to the ads launched against her focused soley on her support for the new minimum wage law passed by the House.

A final note, as art of my work I see employment and income verifications for thousands of households each year. In this rural part of the country there are many person employed in the farm sector that do not earn the minimum wage. Is there some exception for farm labor? These are not teenagers doing these difficult jobs. If there is an exception for such workers shouldn't they be the subject to legislative efforts to provide a real minimum wage for all workers?

Where I live a 16-year old ... (Below threshold)
John S:

Where I live a 16-year old bag stuffer at the supermarket, with zero experience, starts at $8.80 an hour. No one in this state has made only the Federal minimum since about 1985. So the whole issue is BS here.




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