The minimum wage charade
September 19, 2013
OPINION by GORDON MULLIN
Both chambers of the California state legislature recently passed the largest increase in the minimum wage in decades and the Governor promises to sign the bill. The claim by supporters is that the raise will make workers at the bottom of the pay scale better off. I say it will do just the opposite. Here’s why.
Under AB 10, the hourly minimum wage would increase to $8.25 in 2014, $8.75 in 2015 and $9.25 in 2016. Beginning in 2017, the minimum wage would be adjusted annually according to the rate of inflation. There would be no changes in years in which inflation was negative. This will give the State of California the top spot on the USA minimum wage list, a story of pride claimed by supporters. But as we shall see, this is bad news for those at the bottom.
Just to put our discussion in some perspective, here’s a couple of stats from the federal Department of Labor. The unemployment rate in America for those over 16 is 7.3 percent. However, the unemployment rate for folks between the ages of 16 to 19, 22.7 percent; for Blacks, 16 and over 13.5 percent; for Hispanics 16 and over, 9.3 percent; for those with less than high school education, 11.3 percent. Imagine what the unemployment is for a black kid without a high school education. I’ve see estimates as high as 50 percent in our inner cities.
And what is the single, most important gift we can give to these people? Answer – a job. Any job. A job where they have to show up on time, learn to treat the customer with respect and fulfill the requests of their employer. A place to get started and a place to learn one of life’s most important skills.
Keep in mind there are currently 1,299,000 unemployed folks, says the Deptartment of labor, who have never, ever had a job before. Here’s the question we all must ask ourselves – who’s going to hire these folks with the minimum wage above $10?
Understandably, we all would like to see every worker get a great wage but it doesn’t matter what you and I think, what matters is what an employer thinks. And employers think and act just as we would do if we were in that situation. If they can hire a worker for $X, and by doing so that extra employee will bring in X plus something, he or she will be hired. And if the state mandates that an employer must pay $9 an hour, an employer will not create any new job which he cannot make nine or more additional dollars. Actually, it more like 12 to 14 dollars more given the mandatory benefits and payroll taxes that normally accompany an hourly salary.
In short, by raising the minimum wage, the state will insure that all those jobs which pay below the minimum wage, which would have been generated, will not be created. And the most likely recipient of those jobs would have been the young, the uneducated, and the minority kid but now they won’t have access to them because they won’t exist.
It is just those people who we claim we want to help who will in fact be the ones who will be paying the price because those entry level jobs will not be created and they will stay unemployed with all the social dysfunction that goes with it.
I know many proponents of higher minimum wage laws say that it’s a small amount of increase and it won’t affect the number of jobs and the press will easily find workers currently in low wage positions who think it’s a great idea if their wages go up. In fact, what we don’t know and we cannot discover is the number of jobs that would have been created if the wage level had not gone up. How do you count the number of jobs that were never created? You can’t.
The truth is that the majority of workers who are at the bottom will not stay there for long. Keep in mind only 2 percent of workers fall into the minimum wage category and the vast majority of them will not be at that wage scale within one years’ time. They will (hopefully) have learned how to be useful employees and can command an increase in wages beyond what they started with. I know for that’s where I started and you probably did too.
The next time you hear someone advocating that a bump in the minimum wage will not affect anyone’s job ask them, if that’s true, why don’t we just raise the floor to, say, $25 an hour. How about $50. In my experience, you will not receive an answer for all know it would be the death of any economy and hence a foolish notion. That said, for the same reasoning, a small bump, which only applies to those at the bottom will, by definition concentrate the harm on, again, the under-educated, the young and the minorities.
Finally, we should not be mandating the business community to also create a floor on incomes; it’s not their role. Businesses already fulfill an enormously valuable role in our society by their creation of goods and services, for which we should all be grateful. Commerce also creates wealth, jobs and income, together five of the most important contributions to our society. Why burden them with this additional, dysfunctional mandate?
If you really are concerned about creating jobs for the unemployed, the undereducated, minority youth, write your state Senator or Assemblymen and tell them to stop killing the opportunities for an entry level job for those most in need. These are the people who most need our help yet with this legislation we have abandoned them.
FYI our Assemblyman, Katcho Achadjian, voted no to the bill and our Senator, Bill Monning voted yes.
Gordon Mullin is a resident of SLO.