Skip to comments.The Minimum Wage Forces Low-Skill Workers to Compete with Higher-Skill Workers
Posted on 01/04/2014 3:22:54 PM PST by BfloGuy
The efforts underway by the Service Employees International Union, and its political and media allies, to raise the minimum wage from $7.25 to $15 per hour would, if successful, cause major unemployment among low-skilled workers, who are the supposed beneficiaries of those efforts.
The reason is not only the fact that higher wages serve to raise costs of production and thus prices, which in turn serves to reduce physical sales volume and thus the number of workers needed. There is also another equally, if not more important reason in this case, and it is a reason which is only very inadequately described by reference to the substitution of machinery or automation for the direct labor of workers when wages are increased.
This is the fact that a low wage constitutes a competitive advantage for less-skilled workers that serves to protect them from competition from more-skilled workers. In other words, a wage of $7.25 per hour for fast-food workers serves to protect those workers from competition from workers able to earn $8 to $15 per hour in other lines of work. The workers able to earn these higher wage rates are not interested in seeking employment at the lower wage rates of the fast-food workers.
But if the wage of the fast-food workers, and all other workers presently earning less than $15 per hour, is raised to $15 per hour, then these more capable workers can now earn as much as fast-food workers as they can in any of the occupations in which they had been working up to now.
Moreover, the widespread rise in wage rates to $15 per hour will cause unemployment in all of the occupations affected. The unemployed clerks, telemarketers, factory workers, and whoever, who otherwise would have earned between $8 and $15 per hour, will have no reason not to apply for work in fast food, which will now pay as much as any other occupation that is open to them. And since those workers are more capable, it is overwhelmingly likely that to the extent that they do seek employment as fast-food workers, they will be preferred over the low-skilled workers who presently work in fast-food establishments. Thus, the rise in the wage of the fast-food workers will serve as an invitation to the competition of large numbers of workers who do not presently think of working as fast-food workers and who, being better qualified, will almost certainly take away their jobs.
Between less employment overall in the least-skilled lines of work such as fast food, and the incentive created for vastly increased competition for employment in those lines coming from more qualified workers, the effect could well be to close those lines altogether to the employment of workers at the low end of skill and ability. That, of course, would deprive these people of the opportunity to acquire skills and abilities from work experience that otherwise would have enabled them to become capable of performing more demanding jobs later on.
What the demand for a $15 an hour minimum wage represents is a case of low-skilled workers being led to reach for a high-wage bird in the bush, so to speak. Unfortunately, at the high wage, there are both fewer birds in the bush than are presently in hand and most or all of them will fly away into the hands of others, who possess greater skills and abilities, if the attempt is made to reach for them.
This must ultimately be the result even if somehow the present fast-food workers and the like could be enabled to keep their jobs for a time. Even so, practically every time that it became a question of hiring someone new, the new employees would almost certainly be drawn from the ranks of workers of greater skill and ability than those who had customarily been employed in these jobs. Thus, even if not immediately, in time there would simply be no more room in the economic system for workers at or near the bottom of the skills ladder.
No one can question the desirability of being able to earn $15 an hour rather than $7.25 an hour. Still more desirable would be the ability to earn $50 an hour instead of $15 an hour. However, it is necessary to know considerably more than this about economics before attempting to enact sweeping changes in economic policy, changes to be achieved by attempting to organize a mass movement that is based on nothing but a desire for economic improvement and no real knowledge whatever of how actually to achieve it.
It also increases the cost of goods.
Minimum wage plus cost of fuel plus taxes shoves the costs over onto the consumer, which increases costs to the consumer.
GOOD.... 15$ per hour unemployed and no health insurance..
Obama is punishment to America... the democrats should “FEEL IT”...
This idea has been falling on deaf ears for decades: look up “Walter E Williams minimum wage”.
the more unemployed, the more kept out of the workforce, the more on welfare. the more on welfare, the more votes for democrats inorder to keep the government bennies flowing.
sounds more like strategy than compassion
Spot on if you have to pay $15p/h for a person you are going to hire one worth $15p/h and expect more than you would from a $7p/h person. Also those currently on $15p/h will be looking for a raise!
Unemployment and disability are the “new welfare”
I work in a high skill job and make plenty of money doing what I'm doing. So I'm not complaining. I'm making ends meet and then some. But who couldn't use a little extra money?
I generally don't work on weekends and usually get home at reasonable hour on the weekdays so I do have some time available to work a second job and increase my income even more. However, those low-wage service jobs never appealed to me and the extra money I'd make from working one wouldn't be worth the aggravation.
However, if they started paying $15 an hour, it might be worth my while to take one of those jobs and put in 20-25 hours a week. That would add $300 or more a week to my income and that is nothing to sneeze at. Even when taxes are taken out, now I have some serious extra cash I can spend on myself. I can get that new iPad I've been wanting or get that new billiards table for the rec room without the wife getting all goofy on me. I could get some new suits for my daytime job or maybe take a weekend trip to Vegas every once in a while. In other words, that second job will be "splurge" money for me as my daytime job takes care of everything else.
And if fast food joints are suddenly forced to spend $15, then they would want the best quality people for that money. Who wouldn't hire somebody like me? I've got 25+ years of superior performance and dependability. I never call in sick, I'm never late and have excellent customer skills. I'd run circles around all those disaffected youths and allergic-to-work loser-types that mostly work those jobs today.
There will be millions of other people like me vying for those jobs. People that were happy working the one full-time job but suddenly see the appeal of a second job now that some some serious cash is up for grabs. There's not many of us who couldn't use an extra $200-300 a week in their pockets for working a stress-free job in their spare time.
Not one liberal in a thousand would even understand what this article is saying.
ZOOOOM -right over their heads.
when an employer can hire someone with x+1 skills and x+1 education at a certain pay level, why would they keep hiring persons with x-1 skills and x-1 education for the same pay - they wouldn’t; and they don’t
and the Liberals wonder why the “permanently unemployed” has been increasing throughout the era of the increasing “legal minimum wage”
on a local TV channel forum last week, where they were discussing NJ’s new, increased, minmum wage, one of the panelists referred to - in a supportive way - some economist’s prediction that the increased minimum wage would “boost” the NJ economy by a certain %, due to the “extra spending” those earning the higher minimum wage would do;
it seemes everyone else on the panel was as economically ignorant as she was; no one challenged the assumption
no one pointed out that there was no “extra money” entering the NJ economy by way of the increased minimum wage;
employers additional payroll expenses WOULD BE OFFSET in a number of ways with negative income impacts in places other than those earning the minimum wage
employers could increase the prices of their goods; which will result in consumers paying more for the goods sold by employers with whom the minimum wage is paid, which will result in consumers offsetting those price increases by lowered spending on other things
employers could negotiate to pay less to local suppliers - passing some of the cost of their labor increase back through their supply chain; to the extent they do, their suppliers will get less revenue, have less to spend and will spend less, somewhere in the economy
employers could cut back on maintenance supplies, cleaning, landscaping, hours of operation, etc., etc., spending less on them in the process
employers could eliminate some of their employees, making do with fewer workers, since they are forced to pay more for them; the laid off workers will not be getting wages to spend anywhere, as soon as their unemployment runs out
there are myriad ways in which the employers COST of the increased minimum wage WILL BE OFFSET by revenue & spending reductions in the NJ economy, offsetting any “extra spending” the minimum wage workers themselves will be doing
the minimum wage increase does not come from “new money” that miraculous enters the NJ economy; what it gives to someone in the economy, it takes from somewhere else in the economy
There won’t be many fast food jobs. People won’t pay $17 for a Happy Meal. Most of the Fast Food places will go out of business.
Disability is the crown jewel for the grifter crowd. I know of a few people that are working harder at getting disability for being alcoholics than they would just getting a damn job. I am amazed at how many people are simply giving up and turning into parasites (I am talking people that are completely capable of earning income and used to be highly productive).
I can go to a Red Robin at lunch and get a meal served to me for a couple dollars more than going through a MacDonalds drive through. Your opinion of your local Red Robin may vary, but a universal is fast food is garbage.
-— Most of the Fast Food places will go out of business. -—
The gimme crowd will be ringing 911 off the hook.
They will not go out of business. You will be served by machines.
“I am amazed at how many people are simply giving up and turning into parasites (I am talking people that are completely capable of earning income and used to be highly productive).”
I attribute this to the destruction of the WASP etthic as well as the misery that many jobs have become as companies lay off staff. I know too many people who survived layoffs just to see their workdays lengthen with no corresponding increase in pay. When the compensation for not working (whether welfare, unemployment, disability) seems rosy in comparison to actually working a job, this would be the expected outcome.
In the past refusing to work would condemn one to a life bare of comforts, often in an unsafe neighborhood (and that was the motivation to work); that seems to have disappeared now...
When this crisis started (soon after the coronation of our terrorist-in-chief) I was amazed how many people I knew out of work or underworked were searching out casual labor, taking skills underground, displaying ingenuity to make a buck and pay their bills. But now, as you say, many are in surrender mode.
I myself am just getting by, and I thank God in my 50s my health is as good as it is, I get an occaisonal moving job or other casual labor thrown my way.
You can argue against raising the minimum wage without ridiculous hyperbole. Do you realize the labor is only 25% of the total cost of a fast food meal? So do the math; doubling min wage will only increase the meal retail price by 25%.
I think they'll figure out how to make the whole thing self-serve -- like gas stations.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.