Minimum wage/Living wage and unintended consequences

The illegal immigrant protests sparked another discussion among some of my friends of a raise in the minimum wage or the “Living wage” (making the minimum wage large enough to raise a family on). I promised my friends an in-depth explanation of why it’s bad for the poor on every level- and then it occurred to me to post that explanation here so I could take flak from a wider audience as well! :)

I’ll begin with the obvious- as a fellow printer said, “Sure, make the minimum wage $50,000 a year; I’ll just charge a dollar a copy instead of a dime, there’ll be a round of inflation, and it’ll sort itself out and they’ll be a little worse off than before.” It’s true, too; the current minimum wage is more than 20 times what my father earned on his first job- not corrected for inflation, but then that’s the point. Additionally, many manual labor jobs will be eliminated- even the making of french fries and drawing of drinks can be automated; the machines already exist, awaiting only the economic necessity. Unemployment among teenagers will increase.

But it gets worse- an already endangered species of job will near extinction: the entry level job. There was a time when people entered a career by starting as a teen at an entry level position; a “gofer”, a cleaner, a pair of hands. As they demonstrated good work habits and attitude and/or aptitude, they would be given a chance to try more challenging duties. If you had no aptitude, you could easily get an entry level job in another industry. In my own field, printing, nearly every press operator my age or older began in this way. But as these entry level jobs disappear, there will be fewer total jobs (more teen unemployment), and those jobs will require technical training somewhere.

So now the poor will have to pay for technical school to get the same job their fathers got on-the-job training for. And, of course, this means that the only way to discover whether you really have the aptitude or will like it as much as you think you will is to shell out the cash in advance. The schools start inflating the program to increase their revenue- a six week course becomes an associate’s degree; the associate’s becomes a bachelor’s. Now you have a huge student debt to go along with the job your grandfather was paid to learn when he took an entry level job as a press loader or cleaner. To make it more ironic, the modern computer controlled machines are far easier to learn and run than your grandfather’s machines. I’ve watched this happen over three decades in the printing industry; there are virtually no entry level jobs in any printing plant- there are certainly none in mine; we can’t afford them. I haven’t had a job applicant who worked his way up in the field in years; they all have degrees and debts. I’m sure you could get similar testimony from many different industries.

The last step is when those tradesmen with student debts they incurred to win low-paying jobs decide to form associations and lobby to outlaw the practice of their trade without that degree. This makes it impossible for the energetic, entrepreneurial poor to start a new business out of his garage. One example of the syndrome that will be familiar to everyone is the hair salon- in most states it’s actually illegal to cut hair without a license from the State. We have had cases, for example, of illicit corn-row braiders being formally served with cease and desist orders by uniformed police when complaints were filed by outraged licensed hairdressers. Once again, it’s the poor trying to pull themselves up who get hurt. And, of course, this drives prices up, hurting the poor from that angle as well. There are valid state interests in some forms of job regulation, OSHA being a sterling example. Any arbitrary interference in supply and demand as it concerns jobs, however, hurts the poor whether they be workers or consumers.