The minimum wage charade

September 19, 2013
Gordon Mullin

Gordon Mullin

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.

 


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unlisted

Mullin claims that minimum wage workers are an insignificant portion of the workforce “Keep in mind only 2 percent of workers fall into the minimum wage category…” If this is true, how can increasing the minimum wage for only 2% of the workforce be so devastating???


Well, the BLS actually reported that only 1.4% of California’s employees earn the FEDERAL minimum wage or less. That’s because the state has a higher minimum wage, so it’s illegal to pay most employees in California the FEDERAL minimum wage.


I haven’t been able to find the percent of California’s employees who earn the STATE minimum wage or less, but it must be much higher than 2%. The Sacramento Bee just reported that raising the minimum wage to $10 per hour would affect “about 1.5 million full-time, year-round California workers” or “about 14 percent of the state’s full-time workforce.” Now that’s more significant, but excludes part-time employees and includes those who earn up to $9.99 per hour.


BTW, over 61% of the state’s full-time workers sub-$10 per hour employees were over 30 years old.


OnTheOtherHand

Thanks for some actual data — it sounds about right to me but could you be more specific about the source(s)? I have the feeling that this is an issue where both sides are VERY selective in the statistics they use to promote their views.


unlisted

Most of the Bureau of Labor Statistics stats can be accessed from http://www.bls.gov/cps/minwage2012.htm. The Bee article is at http://www.sacbee.com/2013/09/12/5731735/california-minimum-wage-hike-would.html.


This topic is clearly the domain of propoganda.


whatsinaname

I feel some of the “facts” in this article are very debatable.


The unemployment rates are very misleading. The unemployment rates in most European countries is much higher, especially in the younger prospective workers. The US unemployment rate is actually in pretty good shape. I have kids about to enter the workforce that hear all this doom and gloom about the job market. What I tell them is that the employment rate is at 90% if the unemployment rate is at 10%. If you randomly chose 100 young people as prospective hires, you would find 5-10 that have a tattoed and pierced themselves out of a job (unless there are openings at the tattoo/piercing business), you would find 5-10 that have horrible social skills, you would find 5-10 with a language or physical barrier, and you would find 5-10 that want to get paid to do nothing. So if you don’t put yourself in those groups, you will always find work. The higher unemployment rates for those special groupings you refer to are much more a product of their upbringing and personal choices rather than the minimum wage.


The next issue I have is about the businesses simply not hiring employees because they have to pay them $1.00 an hour more. If your business is that fragile it wasn’t much of a business. If McDonalds, Burger King, and Carls Junior all have the same rules, they will raise prices slightly to account for the difference and the consumer will pay for it. If Walmart has to pay a dollar more for their workers, they can raise prices and still be the cheapest in town. Costco is very successful by paying slightly higher wages than other companies. If larger companies struggle, they can react by slowing down the raises for those earning above the minimum wage. Probably half of the restaurants in this county aren’t making money, but the owners have dreamed about owning their own restaurant so they keep doing it anyway. I doubt they will stop hiring people because it costs a little more.


I am not sure that raising the minimum wage is a great idea, but I don’t see anything in this article that makes an argument against it.


zaphod

more adults are living with the parents.


zaphod
TaxMeAgain

View a tax, a fee, or an increase in the wage as DISCOURAGEMENT. The government can only really discourage using these tools. Raising the CA minimum wage will move jobs out of the state. It will also move whole companies out of the state and increase the cost of all of our goods.


This, combined with Obamacare and the massive increases in utility costs, regulatory burdens, and CA specific rules makes this the cherry on a royal screw-up layer cake. California is doomed. Detroit, here we come.


whatsinaname

These arguments make more sense than any of those laid out in this article. Except the California is doomed part. The rest of the country will follow this lead and it will soon even out. I’ve lived through too many “everyone is leaving California” scares to believe it will ever actually happen. People like to complain about this stuff, but when it comes to leaving the state, they don’t. The proof is that there are still too many people here, and too many of them are constantly complaining.


unlisted

Yes, everyone is leaving California, except for the 38 million people who still live hear. BTW, that’s 1 out of every 8 who lives in the US.


I wish more of our losers would move to Texas to snag one of those minimum wage jobs that they’re creating over there.


OnTheOtherHand

There are significant numbers of people leaving California — they tend to be replaced by immigrants with lower skill levels who generally contribute less overall to society (except for the employers who profit more from using them. It is a sort of middle-income version of a “brain drain” situation.


I am seriously thinking about joining them. Sure, someone will move in to take my place if I do but will they be able to do what I do as well as I do? Will they be more likely to drain additional public resources in the form of aid to low income families or the legal system?


Perhaps you won’t notice the difference (or care) as long as the direct costs for their labor are less. As the situation continues to gradually deteriorate, you will, no doubt, find something else to blame because admitting error in proclaimed beliefs is a rare event for most people.


Incidentally, I am not sure that the negative effects of a minimum wage increase will outweigh the positive ones but I don’t think that they should be casually dismissed either.


WiserGuy

First of all, Gordon, your numbers don’t add up.


Secondly, the segments of the population that want this rise in minimum wage the most are the same people YOU claim will be hurt by this. So, you must think you are smarter than them and know best what is good for them.


You’ve got a plantation owner mentality, my friend.


Production goes UP when minimum wage is raised.


Henry Ford raised the minimum wage at his factories and production went up and economy around his factory benefited. He was better off, his workers were better off, and the business in the area were better off.


In the city of Santa Cruz the minimum wage is $12 an hour. They seem to be doing quite well up there. No big deal.


You need to stop treating low level employees as if they are slaves. They need enough money to eat and stay healthy. Is there something wrong with that?


NorCoMod

Santa Cruz? Now that’s a great community to use for a baseline.


zaphod

not significantly different than any other coastal city with a university is it?


racket

Yeah, but supporting a higher min wage allows us white, upper middle class Obispans to FEEL GOOD about ourselves without having to actually do anything. How do you put a value on That?


Rambunctious

I told you…the more good government tries to do… the more people are harmed.


WiserGuy

You mean like providing police and fire protection and a sanitary sewer system? You would rather have outhouses everywhere and not police or fire departments or bridge maintenance? That is your idea of GOOD?


Rambunctious

Well thank you for pointing out what they should be doing and doing it well. Now lets begin to scale back on the things they have no earthly business doing…Deal?


zaphod

show us on the doll where the bad government harmed you


Word
Rambunctious

?!


SLOTECH90

“And what is the single, most important gift we can give to these people? Answer – a job.” GONG!!

Wrong answer. THE most important “gift” we can give to these people is —AN EDUCATION. With a

National drop-out rate of 22% (http://boostup.org/en/facts/statistics) and California at 24%, the con-

clusion is that whatever is done with the Minimum Wage will be symptomatic at best. No state in this

country has a single digit drop-out rate. There are many independent variables at work, so no one

explanation of this will be etiologically significant. Perhaps linking increased minimum wage payments could be linked to Vocational Training, GED achievement, etc.Simply handing out more money is by itself only kicking the can down the street.


isoslo

Wrong…not everyone wants an education. Many in the mainstream educational system will learn a lot by doing but little by sitting in a classroom listening to some boring teacher ramble on about things that are of no interest. You just cannot force everyone to do things alike, many have to do it their own way. Most of the dropouts are going to be dropouts because organized education is just not their thing but most of them learn quite well by doing and experiencing. As part of an American education we should allow dropouts to just go to work and learn their own way, and encourage employers to work with these kids by allowing reduced wages as reward for doing something good for our society.


Word

Wrong. The higher the average education is in America, the better the quality of life would be for everyone.


There will always be people to fill the lowest wage jobs, we need to raise all of our ratings.


The only people helped by lack of education are the rich and the ruling politicos.


dgmullin

Well, that too. We cannot have one without the other.

Gordon Mullin


aft50s

And to address your comment; “…the unemployment rate for folks between the ages of 16 to 19, 22.7 percent…”, do you know why? Its due to some things you failed to touch on;

1. Entry level jobs are now more than ever held by senior citizens. in my day, you didn’t see seniors working the night shift at the corner gas station, or throwing newspapers, or frying burgers. They are doing now in order to survive.

2. This states child labor laws are a joke… a 16 year old kid can’t do much of anything anymore, especially in an construction/industrial setting. Unless the kids parents own the business, about the only thing he can do is sweep the floors, and then only if no one is working with any machinery in the shop.

3. If a kid decides he wants to start a lawn mowing business, or any other type of service related business, he runs the risk of being turned into the State Contractors License Board for operating without a license. Who turns him in-the poor guy out there trying to support his family.


The sad part is we as a society are cranking out kids who don’t know how to work and we will suffer the consequences


zaphod

We are living in a war for debt/profit state, the money is siphoned to dubai instead of circulating here. there are not enough jobs because all the money is tied up in the security scheme invested in threats of death and destruction. too much invested in misery not enough in education.

We need more livingry and less weaponry. We struggle to pay just the interest on the military debt, what is wrong with us? the government will shut down before we reneg on the war debt. what we owe on the debt for Iraq theatre is astounding “the largest cash payout in history: Iraq bribes (source NY FedReserve) estimated at two hundred million in 100 bills. jobs in landmine factories being replaced by robot workers.


BeenThereDoneThat

I’m almost fifty and not all is as you say. You comment in number two. Unless you go back to the industrial revolution when kids worked in factories, kids have only been able to push a broom for awhile. I did on a construction site when I was 16 and today you still can.


Number three. You say they can’t have a lawn business. Per state contractor code, you aren’t in violation as long as the job doesn’t total more than $500.00 labor and material total. If a kid mows a lawn for the neighbor at $10.00 a week, he would just barely cross that in a year. And the board isn’t concerned with some kid mowing a lawn here and there. Trust me.


Yes we are cranking out kids that don’t know how to work. Our schools have become INFATUATED with college only as a possibility and left other under achieving kids behind. I have stated before we need to bring back trade schools both in and out of our schools. Teach a kid to be a car mechanic. Some make 75k a year. Teach them to work construction or be a machinist but lets not pay them a wage in a industry (fast food etc.) which has very minimal skills and hence consummate pay to go with.


aft50s

Of course Katcho Achadjian voted against it-he employs numerous people who would benefit from an increase in the minimum wage, but it would cut into his 30-40% profit margin at the gas station convienece stores.


Jorge Estrada

Even if there were a higher profit margin, the volume needs to be great enough to cover the enviromental regulatory, staffing cost, real-estate cost and so on before the owner gets a penny. If a private business was easy, the failure rate would not be so high.


zaphod

I think raising the wage is a step toward a better way, better for everyone that is