Revisiting the minimum wage argument.

For many years I have considered the concept of paying your dues to be sacrosanct. Something you accepted as part of growing your career and then moved on. Career desired dues required pay here. I worked at various jobs during my early teen years that were horrible jobs that paid far less than the minimum wage. I detassled corn two different summers to earn money. You worked 12 to 14 hours a day and you were happy to do so.

There remains a huge argument about the minimum wage. I wrote about my perception of the problem and the changes needed in the tax code. Now the thinking between that publication and now has occurred. First off, its critical that people are treated fairly. It is also critical that we convey to everyone seeking to join the workforce that in the end you are paid for your skills. When you are starting out you don’t have the skills of a trained professional.

We need a balance. To a degree it is important that we remind our children that in fact they are paid for their skills. Those skills will continue to grow based on education and experience and eventually they too will be paid what they believe they are worth (hopefully). Few people graduate high school and then become the CEO of a company. There are certainly some that do, but they are few and far between. Most of us have to learn the skills that add the value that make us more valuable as employees.

First off it is critical that anyone supporting children receive a livable wage. Either we supplement the minimum wage with rebates or reduced cost housing, food or we increase the wages paid to people with children. We have to ensure children start out life with the education and foundation they need. We do ourselves a disservice as we age, if we do not launch our children.

Secondly we need to quickly start an economic study on the impact of the infamous 15 dollar minimum wage. What does it do to the tax base? What does it do to small businesses? Los Angeles is raising their minimum wage to a higher level. How many new small businesses will open in L.A. over the course of the implementation period of the higher minimum wage? How much automation will replace teenage workers? Disenfranchised young people isn’t the goal of a higher or a lower minimum wage. If it happens it is however a really bad side effect.

Lastly it is important to remember and remind people that you are paid for your skills. People with high levels of skills or who are innovators that change the market make more money in a capitalist system than those who do not have skills. We need to balance fair (reasonable wages) with reality. Perhaps instead of a higher minimum wage in the small business area we could instead offer young people starting out in the workforce a piece of the profits. If the company is successful – all bills paid and enough money to pay the owner the left over profits are split among the hourly professionals. With this incentive model we take care of the fear (young people not working hard) of the shop owner and resolve the fairness of the wages paid (the young people’s fear). You work hard, the business does well and you get paid at the end of the year.

My deepest fear with the constant push to raise the minimum wage is the impact on the high end. If a unskilled worker gets 15 dollars an hour, then what would a skilled worker command? Twice? You see it is often about raising the base without considering the shift. An economic study on the impact of raising the minimum wage is critical. If we raise the unskilled rate to 15 bucks and hour we have to consider raising the rate of the skilled worker.

What happens if we raise that minimum wage, you spend four years in college and you get a .25 cent an hour raise? Do you want a higher minimum wage if it devalues the skills you will gain over time? I am not saying that in the end that will be the case. We don’t have the economic data all the way through the system to determine the impact of this yet. Be careful what you ask for. Sometimes getting what you want may end up costing you more to get what you need.

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Scott Andersen

IASA Fellow!