Case Studies on the Minimum Wage
OK, I will begin this post with what I guess is, for some, a damning admision: My company pays many of its employees minimum wage.
I believe that I have a very honorable relationship with my employees, but for many, particularly on the left, the fact that I pay minimum wage puts me at the approximate moral level of a forced labor camp gaurd. For those of you that feel that way, you might as well move on now because this post will just irritate you further.
I want to present four case studies from my own business as to what happens to workers and consumers when minimum wages go up. For the purpose of this post, I will leave out the philosophical argument of why voters or politicians should even have the right to interfere in the free decision-making between employer and employee, but I certainly addressed it here, in this post. Unfortunately, a large number of voters accept the argument that there is a power imbalance between employer and employee that needs to be moderated by measures like the minimum wage (folks who believe this obviously never have tried to attract and retain quality wokers). Many politicians support minimum wage measures, mainly because it is one of those measures, like protectionism, where the benefits (e.g. Joe got a raise) are much easier to identify than the costs (e.g. Mary lost her job).
Before I get into the case studies, it may be helpful to describe my workers, because in some ways their situation is unique. To run our campgrounds, we mainly employ retired people. Of my 500 workers, well over half are over 60 years old, more than 150 are over 70, some 25 or so are over 80 and a few are even over 90! Most are on social security and medicaire, and many have pensions and retirement health plans. A good number are disabled and have some sort of disability support. While they work slower, they make up for their low productivity in part by their friendliness with customers and their life experience.
Most of my employees travel the country in their RV. They take most of the year off, but many like to work over the summer to make a little money and to pay for their camping site. I give many of them a free or subsidized campsite, worth about $500+ a month, plus all their utilities and then pay them minimum wage for the hours they work. Many are thrilled with these terms - so many that I have a waiting list now of over 300 names of people who are looking for this type work. This list is currently growing by about 10 names a day.
There may be employers somewhere who have a power imbalance over their employees. Some days, I envy them. My employees most all have independent means of support. Further, they all have wheels on their houses, so they can and do pick up and leave if they aren't enjoying their job. And, if they don't like our company, there are thousands of other campground operators who are looking for help.
So why are so many people lining up for minimum wage jobs when lefties and progressives are telling them that they should not want those jobs? Here are some reasons:
- They value the amenities that come with the job, including living for free in a beautiful outdoor setting, something it is impossible to value under minimum wage laws
- They have other means of support, so the money is incidental. In fact, I get more inquiries from employees asking me to reduce their hours so as not to mess up their social security or diabiloity payments as I do people asking for more pay
- They get to work with their spouse as a team. There are not many employers out there that let a husband and wife split up work between them any way they want or even work together - can you imagine such a situation on a GM assembly plant?
- They would have a hard time getting hired by anyone else. Very few employers will hire new workers in their sixities, and certainly not older than that. Older workers can be slower and less productive. For $12 an hour, I would have to hire younger workers too, but at minimum wage, I can afford the lower productivity of older workers and gain the benefit of their experience and trustworthiness.
This last point help set the stage for our cases. I love hiring older workers at $5.15 an hour, and they love the job and line up for it. But what happens when I have to pay these less productive workers $6.00 an hour? What about $7.50? What about at $12.00 an hour? Here are some examples of what happens:
Case 1: The jobs just go away
Washington State has one of the higher minimum wages in the country, at $7.35 an hour. What makes the Washington minimum particularly hard to manage is the fact that it has a built-in escalator, such that it rises each year based on an inflation index (as you might imagine, since labor is a major component of most goods and services, this creates a positive feedback loop).
We run a number of campgrounds in Washington under concession contract from the US Forest Service. Most of these campgrounds are both small and very isolated, and are therefore labor intensive. Given local market conditions, it is increasingly difficult to raise fees fast enough to keep up with rising labor rates (as well as labor-linked costs such as workers comp and unemployment) since we are competing against larger private campgrounds that are designed more efficiently and may be closer to local labor. We have effectively given up trying to make money in this area, and will very likely not rebid the contract when it expires. Given USFS experience on other similar contracts in the area, there is a good chance that no private company will bid for the contract, and the campgrounds will revert to USFS operation. In this case, many will likely be closed, and instead of having minimum wage jobs, there will be no jobs left at all.
Case 2: The jobs get outsourced to contractors
In a number of locations, we have been forced by rising minimum wages and associated costs (particulalry workers comp.) to switch some of our cleaning and landscaping duties from our live on-site employees to local contractors. These contractors may pay their workers more than minimum wage, but the workers are often twice as productive as ours, yielding a cost savings for us. When minimum wages are $5.15 an hour, these contractors can't compete with our own workers, but when minimum wages rise over $7.00, as they are across the west coast, this option starts to become attractive.
Case 3: The jobs get automated away
One of the more frustrating situations we have is one government concesion contract where the government has continued to insist that the Service Contract Act (SCA) applies. Like the Davis-Bacon act, the SCA sets minimum wages that contractors have to pay to employees when serving the government (for example, on a contract to clean the bathrooms in a goverment office building). These rates, while ostensibly the market prevailing wages, are in almost every case FAR higher than what a private company would have to pay in the market to get good employees. By specific Labor Department regulation, the SCA typically does not apply to concession contracts (I won't bore you with the details, but more in this series here or email me if you need help in a similar situation, I have been forced to become an expert).
Anyway, on this particular concession we have to pay our living-on-site workers based on the SCA. This means, for example, that someone who sits in a parking lot booth collecting parking fees must be paid something like $12.50 an hour, which translates to a bit over $15.60 when you factor in FICA, SUI and workers comp. Over 2000 hours a year that is $31,200 a year.
A fully automated fee collection machine (which actually does more than the attendent, since it takes credit and debit cards as well as makes change for cash) costs $23,000. Plus, the machine never will sue over wrongful termination, never will discriminate against or sexually harass a customer, never will steal, and never will fail to show up for work.
What would you do? I would prefer to have the person there, and if we put the machine in I will still probably staff the booth on busy summer weekends to help customers out, but over 5 years the machine may save us over $100,000.
Case 4: Prices go up to customers
Last election, Floridians voted themselves a minimum wage increase of $1.00, and worse, voted that the wage will increase each year by a cost of living factor. As a result, on the May 2 effective date, our costs will go up by about 15% in managing the swim areas and campgrounds in that area. Since this is well over our profit margin, prices will also go up by the same amount on the same day. This is unfortunate, because it tends to be lower income people who most enjoy the recreation opportunities we offer, since historically we have been able to keep our costs, and therefore the pricing, so much lower than outrageously expensive attractions like Disney and Universal Studios.
Final Thoughts
I'm not going to cry that my business is doomed by minimum wage increases, because it is not. As you can see above, we have many options for dealing with these changes. What I fear may be doomed, though, is the special relationship our company has always had with older, retired workers. For now, the business model is OK, but there is a point, somewhere between about $7.00 and hour and $10.00 an hour, where rising minimum wages will push us to look for other ways to staff our parks rather other than our traditional use of live-on-site retirees. And that would be sad for everyone.
For more on the topic, Powerline has a nice article today on minimum wage increase proposals in Minnesota. It is astounding to me that people still want to believe the notion that minimum wages don't affect employment. Just look at France and Germany for living proof. Or, consider any other commodity in the market. If the government set a price floor for gasolene, say at $3.00 a gallon, would anyone out there argue that people wouldn't use less gas? But when we try to raise the price floor on labor, the media and politicians with a straight face try to argue that businesses won't use less labor. Or, for the reverse, look at the experience with natural gas and airline travel - the government removed price floors on these commodities in the lates 70s / early 80s and look at how demand has skyrocketed. (update: Powerline has a second post on the topic here)
For even more good reading, Cafe Hayek is always a good source for defense of free market economics, including this good post on French work week laws. More on minimum wage here.
Accidental Verbosity:
Minimum Wages and Optimum Ages
Coyote Blog has an excellent post on the problem of minimum wage, with specific examples of the consequences of such laws from his business. To me, minimum wage has always been illogical and damaging on the face of it; sort of an "any idiot can...
March 29, 2005, 11:49 amMcwop:
Here by way of Cafe Hayek. Superb post on the dangers of command and control policies. Not everyone, or every business is the same.
I once held a job for minimum wage (1991-1992) - and no overtime pay if I went past 40 hours. My yearly paycheck was below the federal poverty level. My cabin was $25 a month in rent, and my meals were covered. Health benefits kicked in after 200 days of work.
I was happier than a clam, because I got to live in the smokies and do lots of whitewater kayaking. Those were fine tradeoffs.
March 29, 2005, 3:19 pmmark:
Your story is very interesting, but to say that you pay minimum wage is not really true. As you say in your case study, you also offer your employees the option to say at the camp sites free of charge. The other part that made me laugh was your attacks on SCA, and out government that enacted the laws like this one. If you have a problem with this act then don't apply for the contract. I'm sure that you couldn't live off of $31,000 a year.
March 29, 2005, 3:28 pmThe Club for Growth Blog:
The Realities of the Minimum Wage
Warren Meyer, proprietor the Coyote Blog, writes a wonderful and detailed account on how the minimum wage affects himself and the small business that he owns....
March 29, 2005, 3:33 pmnorm:
Also here via Cafe Hayek (via The Economics Roundtable).
On my way over I was preparing for an article dismissive of everything Economists have been saying for...a long time? Instead you've articulated an easy to decipher tale of why the system does not work.
I am currently an undergrad Econ major. However, this theory was taught to me a long time ago. Perhaps it is more easily realized when you come from a small town. Finding a summer job when I was younger was impossible. Small businesses could not afford to hire kids to do labour. It just was not worth the $7.00 per hour. Would I have been happy to make $5.00 an hour? You bet.
That is what the layman fails to understand. Whether it is a small, local flower shop or a huge, multinational corporation, they will not hire you for the public good if it will cost the business money. If you are getting paid $7.00 an hour then you better be doing $7.01/hour worth of work.
Anyway, just reiterating what you have said. Good article.
March 29, 2005, 6:50 pmAndrew:
This is a great piece. I wish more economists spent time doing these sorts of rich interview with actual entrepreneurs. The theory of industrial organization and property rights economics would benefit.
March 30, 2005, 8:15 amThe Glittering Eye:
Catching my eye: morning A through Z
Here's what's caught my eye this morning: Waheed, the Afghan Warrior, answers some email questions. Interesting stuff. I see that blog-friend Marc Schulman's excellent blog, American Future, has evolved. He's now a Large Mammal in the N. Z. Bear Ecosys...
March 30, 2005, 10:11 amDOR:
Hong Kong (where I live) is considering a minimum wage. Here are some thoughts:
Some years back, the European Economic Community (now the European Union) bowed to agricultural interest groups and set a minimum price for butter that was higher than the market rate. Producers found their customers preferred cheaper imports, and so quotas were imposed, to protect the local market. Eventually, over-production led to what became known as the “butter mountainâ€, and in the end governments had to buy the surplus and dump it as animal feed at a steep cost to public finances.
In the case of labor, price supports are known as a minimum wage, import restrictions are handled by the Immigration Department and the surplus is additional unemployment. In the case of butter, Europeans probably wish they had left well enough alone, and therein lies a lesson for Hong Kong when it comes to the issue of minimum wage.
A minimum wage dictates the lowest level of payment permitted by law. It removes the market pricing mechanism by fiat, decreeing that no job is worth less than X per hour. It mainly affects the most vulnerable in society—the unskilled worker and new entrants to the job market, but since a business needs to earn more than it pays out, the effect is to render legally unemployable anyone who is unable to produce a certain minimum value to an employer.
Proponents of a minimum wage law argue that it addresses poverty by raising incomes, and that the wage level should be such that it enables sufficient purchasing power for a basic standard of living. Opponents argue that poverty reduction is better handled by other means. From the employer’s perspective, a minimum wage set above the market level is exactly the same as an increase in taxes: it has to be paid if the company is to stay in business.
While all of us would wish to reduce poverty, there are other and more efficient means to achieve that end. Education and vocational training programs that enable workers to better compete in the marketplace can produce much the same results, but at a lower cost to society. Raising productivity, rather than prices, is the key to competitiveness in the global economy.
Supply and demand
If there is minimum law legislation, companies are faced with four (legal) options.
Where a business has a sufficiently strong market position it may raise prices, thereby passing on the increased cost of doing business to its customers. The higher costs incurred at the upper end of the supply chain are passed down the line, and finally imposed on the end-consumer in the form of increased inflation. All else being equal, higher prices will tend to dampen down demand, reducing the volume of business and thus the overall number of jobs. In a wide-open economy such as ours, the share of purchases made in Shenzhen would likely rise.
A second option, for companies in a weaker market position but with comfortable profit margins, is to absorb the higher costs without a price increase, and accept lower margins. The lower expected rate of return would discourage future investment, and hence, employment.
A third option would be to reduce either the number of employees or the number of hours worked. To hold the total wage bill steady in the face of a minimum wage 5 percent higher than current market rates, a company of 20 employees has a choice between eliminating one person’s income or reducing each employee’s 40-hour workweek by two hours. The former increases unemployment while the latter does nothing to increase incomes.
Many businesses are likely to try a mix of options including price increases, margin reductions and reducing the total wage bill. For the remainder, the final option (in more ways than one) is to close down and lay off workers, regardless of their level of compensation or contribution to the bottom line. Some companies would move to where costs are lower while others would go out of business. Among the second group, the ones most likely to be legislated into bankruptcy are the smallest firms and those that employ the least skilled members of society.
In the final analysis, a minimum wage is a transfer of wealth from businesses and consumers to low-skilled workers. In most cases, such a transfer is now funded from general tax revenues, where society takes care of the less fortunate in as fair a way as possible with a high degree of transparency. The minimum wage tax, however, applies only to those who employ the lowest paid workers, and is imposed with little transparency or accountability.
The business sector feels that, rather than the Government imposing additional regulations on companies, there should be a serious debate—in which we will gladly participate—on how to structurally improve the prospects of the poorest members of our society. Europe paid for legislating a minimum price for butter, but the cost of that policy error was manageable. In our competitive world, Hong Kong cannot afford such a mistake.
March 30, 2005, 8:33 pmTim Worstall:
More More Minimum Wage.
The Coyote Blog has an excellent takedown of the minimum wage from the point of view of someone who actually has to pay it. Anyone who wants to argue in favour of the minimum wage in the UK should try
March 31, 2005, 6:46 amTim Worstall:
More More Minimum Wage.
The Coyote Blog has an excellent takedown of the minimum wage from the point of view of someone who actually has to pay it. Anyone who wants to argue in favour of the minimum wage in the UK should try
March 31, 2005, 8:30 ambeberlei:
Actually Germany has no minimum wage levels. You can work to whatever wage you want. The problem is the high social security payout, which acts as a indirect minimum wage level. But Students, pupils and retired persons for example (they get their rent) can't apply for social security in most cases and are likely to work for low money/hour.
April 2, 2005, 2:56 amBelac:
While your arguments are spot-on, your case is hardly typical. You employ people with an outside source of income (social security), who have been working in other fields for decades pre-retirement and thus may have their own savings, and you provide them with significant amenities.
I would find all of this more convincing if you were a restauranteur writing about your cooking and delivery staff, or some other business which employs traditional working-age workers and does not provide them with amenities. As is, your anecdotes about your own business do not support your arguments about minimum-wage in general.
April 3, 2005, 10:51 amLaw:
Welcome to the Carnival of the Capitalists!!!
Law
April 4, 2005, 8:46 amMcGroarty:
France and Germany make good examples of what happens with wage interference.
Also take a look at Chinese manufacturing for what happens without the labor price controls. In recent years, they've run out of workers and so manufacturers have been steadily bumping wages to compete for very low skill labor. This is what happens when the labor force is allowed to approach full employment.
April 4, 2005, 9:09 amArizona Watch:
Minimum Wage and Illegal Immigration
Having just read an excellent post at Coyote Blog detailing personal the poster's personal experience as a business owner with the minimum wage, I got to thinking about Arizona's own push to raise the minimum wage.
As you may know, the legislature...
April 4, 2005, 6:36 pmtrying to grok:
QUICKIES
I'm with Deskmerc: Berger needs a whupin' from my husband's platoon sergeant. Via Amritas: a good write-up on minimum wage...
April 5, 2005, 4:54 amMises Economics Blog:
Minimum Wage vs. Old Folks
Coyote Blog has a fascinating analysis based on experience running nature camps of the impact of rising minimum wage laws: Case Studies on the Minimum Wage (Thanks Cafe Hayek) There are numerous lessons in this short article. Money income is...
April 5, 2005, 8:00 amSigivald:
Belac: Countless food-service people have written about this. It's not exactly news that raising costs of employment make un-productive employees un-hireable. (In plainer language, anyone who costs more to employ thanks to a wage law, than you can gain from employing him, ain't gonna get a job).
April 5, 2005, 9:31 amDr. Weevil:
I can testify about the evils of minimum wage laws from the other side -- as someone who has been unemployed and then very badly employed because of these laws. I wrote about my experience here: http://www.doctorweevil.org/archives/000369.html. Unfortunately, comments on the post are closed, but some of you may find it interesting.
April 5, 2005, 5:38 pmMatt T.:
A couple posters have argued that this case isn't typical because these are seniors who don't need the minimum wage to survive.
Actually, that's quite typical of minimum wage workers. Not that they're seniors--the majority are in the 18-22 range, I believe. But the majority who work minimum wage only do so part-time. And the majority are not relying on that income alone to survive.
Even if none of this were true, you seem to be ignoring that in 3 of the 4 cases offered, these people lost their jobs. If they had been relying on these jobs for sustenance, it would be even worse!
Good intentions aren't enough. The fact that some people are a)poor and b)don't have valuable labor to offer cannot be changed by regulating prices. But you can certainly make the situation worse this way, by legally banning the employment relationships that exist in spite of these conditions.
April 5, 2005, 11:32 pmDOR:
McGroarty,
Don’t mistake an unwillingness to pay the asking wage with a shortage of workers. The problem in China is that factories don’t want to pay the wages workers want. So, the workers don’t come back from their holidays (January-February, Chinese New Year) and some journalist gets lazy and writes about shortages.
In China, full employment is still 150 million people away.
DOR
April 7, 2005, 6:27 pmHong Kong
.
Catallarchy:
How lack of economic freedom hurts the poor
Two items from the last week caught my eye.
First, Coyote Blog has an outstanding post based on personal case studies on how minimum wage laws hurt retirees. It's easy to see the immediate narrow benefits of higher paid workers, but it's more dif...
April 8, 2005, 6:37 amIsaac Schrödinger:
Minimum Wage = Bad Policy
Many people still think that the government can simply legislate higher wages without harmful effects to labor. This sad post
April 9, 2005, 4:10 amSoulfish:
Very interesting example but perhaps rather it proves the need for a minimum wage floor in the general picture of the nation as a whole.
Yours is the classic exception that proves the rule:
(1) Your retired workers need a supplement to their incomes rather than a living wage and are then not the target population for the minimum wage as generally conceived in law.
(2) The natural (not minimum wage supported) wage level for the worker population serving your business, since it's need is supplemental (and in addition includes amenities beyond the wage you pay), would be far below a living wage for a worker in the general population. This proves the need for a wage floor in the general case for which a minimum wage is desired and beneficial for the economy as a whole.
(3) The public land on which you make your business as a tenant is a special reminder that no business is an island to itself. Workers are not merely commodities to be either employed or left in the supply bin. In addition to being citizens (employed or not they are owners of the land as citizens) by and for which the nation has its being, well-paid workers give back to the economy in at least three ways: the wealth they build (in your company and the land), their increased purchasing power in the economy, and their increased stable cultural strength for this and future generations.
April 18, 2005, 6:58 pmThe Bailiwick:
Wal-Mart's "Evils"
I typically don't shop at Wal-Mart for a variety of reasons that I largely keep to myself, mostly though, it's logistics. I have shopped at one of their many local outlets at one time or another though, and I am always amazed by their prices. For peo...
July 9, 2005, 6:57 amOwlish Mutterings:
Immigration and Minimum Wage
Eric Grumbles about immigration, JohnL likes the article. Gullyborg has a different take. [although maybe not that different] My thoughts: (1) I don't know if I believe it's impossible to improve security through tightening our borders. On one hand, te...
July 19, 2005, 7:42 amwilly:
Making humans work at less than $10 an hour is an abuse, and a sure sign that the job offered by the abuser means nothing in terms of added value : it is a waste. If a fast food outlet cannot charge enough for a decent pay, that means their product is marginal crap, which it is, so let it shut down. It's better, cheaper and even quicker if you cook that crap at home.
With modern technology, only part of the world needs to work (which basically means: burn oil and let the inanimate energy slaves do the real work).
So let's increase the minimum wage, drop all those useless and wasteful services, and pay the forcedly unemployed with the energy saved. It's win-win.
PS sexual exploitation of brothel personnel is a far more honest form of abuse, since at least it is payed, meaning the service offered is in genuine demand.
July 25, 2005, 5:24 amChris:
Minimum wage is a moral issue used by politicians to make it seem like they truly care about their constituency. Instead, minimum wage contradicts the law of supply and demand by instituting a forced labor rate.
July 26, 2005, 7:45 pmarizona llc:
Incorporate a Arizona LLC. They offer solutions for limited liability company asset protection in Arizona and California. Incorporation services are provided online with 24 hour filings and expedited approvals. http://www.companyinc.net for CPA lawyers
September 8, 2005, 5:09 pmMark Shannon:
https://www.coyoteblog.com
October 13, 2005, 1:35 pmMinimum limited liability company:
This is in fact true for limited liability companies, but Arizona has a minimum wage law thatreaches past federal standards.
October 13, 2005, 1:38 pmLimited:
When you said "thatreaches past federal standards", didn't you really mean "that reaches past..."? Sorry to be so picky but the English language get's more and more diluted every day.
Back to the subject, with respect to LLC I found other online information but you will need to e-mail me for the director.
October 13, 2005, 1:43 pmslocum:
"While your arguments are spot-on, your case is hardly typical. You employ people with an outside source of income (social security), who have been working in other fields for decades pre-retirement and thus may have their own savings, and you provide them with significant amenities."
(Well, now, befoe posting, I notice I'm really late to the party, but since I already wrote my response...)
But that is hardly an atypical case -- not only does it apply to millions of retirees, it also applies to millions of students who may have few skills and low productivity but have other sources of income (their parents) and for whom minimum wage work makes sense. It also includes some significant number of married persons (mostly women) who are not primary breadwinners and want part-time work to keep them busy--jobs that have no pay at all (volunteer work) fit the bill, but so do low paying jobs of certain types. My family use to own women's clothing shops -- many of the women who worked there at low wages didn't *need* the jobs, but it was pleasant, social, and socially-respectable work (e.g. well-to-do women could do this part time and not feel they were doing something 'beneath' them. Rather than be embarrassed, they would enjoy having their friends come in and wait on them.) And, similar to the free camp site, they got first crack at new clothes that came in (at employee discount prices). I suspect that if we looked at adult workers in many similar low-paying but 'genteel' jobs, we'd still find a lot of these people (in clothing stores, book stores, antique stores, craft stores, framing shops, plant nurseries, florists, caterering businesses, etc, etc).
We could, I suppose try to have a tiered minimum wage structure for retirees and students, but I have no idea how we'd structure things to apply to adults who don't really need the money but want something pleasant to fill their time. Far better than some complex scheme would be to attack the real problem from the other direction. Instead of increasing the minimum wage, we should expand the EITC, so only that fraction of minimum-wage workers who *are* struggling to support themselves on $5.15 are helped, and those people who are just looking for part-time employment to give them something to do and provide pocket-money don't have their jobs priced out of existence.
December 6, 2005, 3:26 pmHolly Todak:
Well i just wanted to say that this site was very useful in a study that i was conducting through my university. So thanks angain for all of the stupendous information regarding minumum wage and the affects of it in the current public.
December 12, 2005, 10:58 amTC:
Here is another effect of a min wage increase.
Have to scratch head but it seems the last fed increase was in 1986 with a two step jump.
What your congress folks woun't tell you is that the federal coffers were the big winners! Their revenue doubled, yet they did what with it?
Current deficit is what?
Hiring older non dependant workers is GREAT!
It's too bad, but it seems that much of the youth looking for entry level jobs are so unprepared to actually work for a business serving the general public. They are ignorant, arrogant, selfish and all too many adorned with stuff I will not allow to be seen by one of my customers.
BTW in my rural hotel out of 20 or so on staff, you could not find but three or four actually making min wage. My average was much higher, and such was not due to it being an overly busy facility. But out of the care we have for having a dependable workforce.
February 23, 2006, 11:05 pmPF:
All that you state is unique to your business and it's "nice" that you give extra benefits to your senior employees. However, if you remove your unique situation from the equation and get back to reality, most employers find everyway possible to avoid paying the minimum wage. Grouping all seniors into a bucket of receiving extravagant retirement packages and government subsidies isn't fair either. The seniors that HAVE to work and don't have enough money for both food and medicines are vast.
I will propose one solution to the problem: Tie any percentage increase in the minimum wage to the lucrative raises that Congress gives themselves in the dead of night! If we handcuff their need for greed to letting people at the bottom survive, I think we'll have some balance.
By the way, how often do you give yourself a raise? Raises are nice aren't they? Sorry you're so much like Congress in the: "Do as I say, not as I do" camp!
February 26, 2006, 8:13 amRobert Nanders:
Nice post, thanks for bringing the human element in to help people see what the true costs of minimum wage laws can be.
June 14, 2006, 9:46 pmBen:
Thanks for a great post. I can't say that I agree with you on many things and because your experiences are largely anecdotal, they are not applicable to the larger debate on the effects of minimum wage.
Additionally, free perks such as a free campsite amounts to free rent. While this is a great benefit and gesture on your part, I can not imagine many employers, especially urban employers offering a perk like that, and essentially while it is not showing in their pay, their pay is in addition to whatever the cost of the perks are, so they are technically not being paid minimum wage.
But I do enjoy your writing style and will link to a post on the effects of minimum wage that I am doing.
-Ben
June 22, 2006, 6:47 amStephan von Lorraine-Schultz:
I have come across your well-reasoned and reasonable post. Although I am in favour of increased minimum wages, I cannot but say that your post is very thought-provoking. I agree with you on Points 1 and 4. However, outsourcing and automation (Points 2 & 3) are actually what should, SHOULD, happen in an efficient economy, because those methods are evidently EFFICIENT, and thus would be good for the economy. In that sense, by inducing increased automation and outsourcing, which clearly is more efficient and thus economically beneficial than the status quo, the (increased) minimum wage actually is good for the economy. Sure, one could argue that the said senior workers would be unfairly and adversely affected by the increase in minimum wage, but the simple fact of the matter is that if they are as susceptible to outsourcing and automation as they seem to be, then obviously, the economic effiency and thus, economic benefit, of the said employment mode and arrangement would be open to question and debate.
June 30, 2006, 5:54 pmAndreas:
All employers are against a minimum wage. In particular them who profits the most from dumping-wages. Did I say "all employers"?
Not all!
Especially in Germany (some of you call it "Old Europe") you find more and more employers who (please, pay attention now!) demands a minimum wage.
http://blog.mindestlohn.de/3/viewentry/1121
I don´t have any idea which dogma rules former McKinsey-Consultants (like the author of this blog) which leads them to a strictly refusing of any minimum wage.
It might be that McKinsey is specialized in business-management but not in political-economics.
Anyway. Thanks a lot for the insight you´ve given in your kind of watching the economics. I´ll use it for one of my next essays about "employer and how they consider the worth of work" in comparison to the value which they give to their personal gain generating out of the work of their employees.
October 3, 2006, 2:30 amMike Kozlowski:
It's terrible that companies pay hard working people only minimum wage. People all over are struggling by living check-to-check. I am a landlord and know serveral ways for people to make at least $20 per hour by just painting and cleaning rentals to get them ready for rent or for sale.
--Mike Kozlowski
October 7, 2006, 12:10 amhttp://www.wowBIGmoney.com
Bruce Hall:
In a number of locations, we have been forced by rising minimum wages and associated costs (particulalry workers comp.) to switch some of our cleaning and landscaping duties from our live on-site employees to local contractors. These contractors may pay their workers more than minimum wage, but the workers are often twice as productive as ours, yielding a cost savings for us. When minimum wages are $5.15 an hour, these contractors can't compete with our own workers, but when minimum wages rise over $7.00, as they are across the west coast, this option starts to become attractive.
Hmmm. As a small business owner, I would have to say that you are just making excuses for your own business inefficiency. After all, these contractors will have to pay the same minimum wages, so why can they do it and succeed when you do it and fail.
The argument about "affordability" is a red herring.
October 12, 2006, 11:30 amDavid Nieporent:
Bruce, reading is fundamental. You might want to try it sometime. He explained why they can do it and he can't. Because he hires old people and they don't.
He could do it if he were willing to hire younger people. But that wouldn't exactly help the minimum wage old people, would it?
October 13, 2006, 12:37 pmSean Goerling:
Sure, SOME employers are for a minimum wagelike McDonalds or Wal-Mart. As big corporations making millions they can AFFORD to pay more. "Progressives" (ie. leftists) love to quote surveys that show most small business owners want to pay their employees more than minimum wage. However, they ignore how many small business owners are FORCED to pay minimum wage to be able to hire enough employees. In effect, laws like this are outlawing any possible mutually beneficial wages the employee and employer may have agreed upon that the politicians in charge deemed unworthy.
Let me give you an example: Let's say that the "Progressives" (ie. leftists) in government outlawed all covential gasoline automobiles and mandated that in order to save the enironment all automobiles run on hydrogen, electricty, biodesiel, etc.That legislation wouldn't change the fact that these alternative fuels and vehicles that use them cost much more than ones that use coventional gasoline. While most families in the US have an automobile currently after the legislation went into effect FAR, FAR fewer would be able to afford it. If you want proof, look at Europe, where far higher prices for gasoline (and everything else) have put owning and using an automobile out of economic reach for many, many people.
September 10, 2014, 10:46 amJamesW:
Wow - that's some twisted reasoning you have there. So, assuming you are all for raising the minimum wage so people can make a living wage, then how does it help to replace them by automation and outsourcing? Or don't you care?
April 26, 2016, 2:50 pmJamesW:
Wow. I mean, wow. Have you ever had a job or done anything productive?
April 26, 2016, 2:58 pmJamesW:
Sure are a lot of people writing about stuff that I am not sure they even have a clue about. Minimum wage jobs are entry-level jobs. They are not now, never will be, and never have been intended as a job that will pay a living wage for a family of four. The concept behind this is that a person takes a minimum wage job because they have no other employment history and have nothing to show an employer about the skills they have and why they should be hired. The minimum wage job is for people who need to learn useful skills in order to move up in the world. Once they have learned some useful skills, it is time to move on to something a little higher-paying and leave an empty position for a new entry-level person to come in and learn some useful skills.
April 26, 2016, 3:13 pmMy first job was working at a (real) gas station for $1.65 an hour. I learned how to deal with customers, take people's money and credit cards, cash out the register at the end of the night, change oil and tires, repair flat tires, do any number of other car repairs, wash concrete garage bay floors, and hundreds of other useful things that have served me well over my whole life. My next job was at a car dealership as a general "lot boy" for $2.00 an hour. I learned a lot of stuff there, too, and made myself more valuable to my next employer, who actually hired me for way more than minimum wage when I was still only 18. Currently, I am in a completely different industry and basically on career number three, and I am making well over six figures as a Senior manager in the IT field. With no real college to speak of.
So, all the people that cry for the poor worker making minimum wage? Cry me a river. You want to fix that? Make sure that your idiots in the white house and congress quit screwing up the economy. That is a much faster, more effective, and much more fair fix for this problem.
tobiastook:
The true minimum wage is always $0.
April 30, 2016, 8:53 amOugur:
Education creates awareness but unfortunately even some highly qualified persons make normal mistakes, now a days every organizations want to motivate employee because their employer have learned and studied the benefits of motivation but still some employer does not facilitate their employees and does not get those output which is required
July 18, 2016, 1:43 pmcesium62:
Anecdotes trump evidence. Every time.
February 22, 2017, 2:30 am