The minimum wage debate is an old favorite. Another very visible and clear line of disagreement between conservatives and liberals. There are those on one side that feel we should increase the minimum wage to a level that better represents a living wage. Other, myself included, feel that wages are best left to the negotiations of the employer and the employee.
There are all kinds of debates raging about that people aren’t able to afford to raise a family on the minimum wage. Heck, it can be legitimately argued that you can’t raise YOURSELF on minimum wage. Be that as it may, I don’t wanna get into that. What I wanna look at is what the impact of the minimum wage, specifically changing it, has on the folks earning it.
Minimum wage is that dollar amount that employers pay to their most unskilled labor. These roles in the company can often be filled by interchangeable employees. That’s to say that if Bobby decides to leave, Bobby can be replaced with Sally virtually immediately. Training and on-boarding costs are very low by definition. If those costs were higher, the employer would be incented to pay Bobby more in order to avoid ‘em. It is true then, that the employee pullin’ minimum wage is the least skilled labor in the market. We can see what happens when labor becomes skilled even in a country of billions:
“We have responded to the labour shortage problem by constantly recruiting workers and raising wages by 20-30% compared to last year but even then it is not enough to ensure the supply of labour,” the source said in Mandarin.
So, who is it that represents this most basic unskilled worker in America? New entrants into the job market. And which demographic is that? Teen workers, literally, the new employee.
So how does raising the minimum wage impact this group of people. Well, at the most basic, labor is a commodity exactly like copper, cotton or steel. As the price for a commodity increases, firms buy less of it. They seek more productive uses for it or look for cheaper alternatives. Labor is no different. So, we could look at the unemployment rate for teens and track it along the changing minimum wage levels. But, if we did that, we might be looking at the wrong data. After all, unemployment, teen or otherwise, is impacted by many MANY things going on, not just minimum wage.
So, in order to better pinpoint teen unemployment changes, I look at “Excess Teen Unemployment”. That is, I take the unemployment rate for all workers and compare it to the unemployment rate for our teens. Subtracting the 2 gives you the excess teen unemployment. When we track this excess unemployment against minimum wage changes, we get this:
With the exception of the times in the mid 90′s when we had a combination of a fantastic economy and stable minimum wage, we see that for every step UP in the minimum wage there is a corresponding step UP in the excess teen unemployment. It’s a pattern that’s clear in 1990 and again as minimum wage laws ratcheted up the rate in 2007, 2008 and 2009.
As clear as clear can be we see Econ 101. As the cost of something increases, purchasers of that something will reduce their purchases of that thing. In this case, teen workers. And it manifests itself in the increase of teen unemployment. Which right now is hovering at about 15%.
So, if teens are the class of workers being employed at the minimum wage, is there a group of people even MORE dependent on this wage? There is. And, ironically, it’s the very group of people who I suspect folks wanna help when they fight for minimum wage increases. And the tragedy is the absolute devastating impact those laws have on those very people it’s meant to protect. The black teen:
I have no doubt that my Liberal friends have only the most noble of intentions when they plan and institute laws like the minimum wage. I’m sure, absolutely SURE, they mean to help folks and not harm them. But the results of their legislation are as clear as they are horrible. The results of higher minimum wages means that employers hire fewer folks on the margin. These kids then are left with nothing to do and lose years, in many cases decades, of valuable on the job skill refinement. The result to themselves is a lost lifetime of wages relegating them to poverty for much of, if not all of, their lives.