President Obama’s State of the Union call for an increase in the federal minimum wage demonstrates his inability to understand basic economics and will increase the barrier to employment for unskilled workers.
As we grow from childhood to adulthood, we gradually develop our natural talents and acquire new skills we hone for employment throughout our life journey. We aren’t born with these skills, and those talents we are born with require practiced development to maximize their potential. At some point, we are expected to enter the workforce to better mankind and support ourselves as most of us are not privileged to have overindulgent parents in no hurry to push us out of the nest. Holding a job involves the acquisition and practice of a number of skills that must be augmented with the continual acquisition and practice of additional skills to move up the job ladder.
The only way to acquire these job skills is to become employed and begin the learning process. The problem with this strategy is that you must convince an employer to hire you as is, without skills, and commit to tolerating you as you acquire and develop these skills. At this point, you are an unskilled worker commodity indistinguishable from every other unskilled worker seeking employment.
Naturally, the employer wishes to pay as little as possible for this commodity he can get anywhere, and your chances of landing this first job hinge on first impressions such as a neat and tidy appearance, enthusiasm at getting a chance to work, and respect for both the business owner and the business itself. These are the only things you have to offer the employer as you’ve yet to develop any useful skills. The job itself will be relatively uncomplicated and allow you to develop basic job skills such as dependability in the form of showing up on time every time, attention to detail, customer interaction, teamwork, and a sense of esprit de corps.
You will feel that you have much to offer and are worth the business owner’s investment in time and money, but take a minute to reverse the situation and imagine yourself as the business owner asked to employ someone with no skills and tolerate them until they become productive. You have to take someone with no skills, invest your time and money into training them, tolerate their mistakes which cut into your bottom line, and hope that once they become productive, they remain with you long enough to recoup your original investment.
As they’re learning, they’re costing you money, and the government has mandated that you pay them a minimum wage regardless of whether they’re worth it or not. Now, suppose you have a choice between hiring an unskilled worker and hiring a seasoned worker for the same minimum wage. Common sense dictates hiring the seasoned worker as they will involve less expense and begin contributing to the bottom line much faster. Or, consider the fact that you might not really need an extra worker when that unskilled applicant comes calling.
Now realize that you are that unskilled applicant competing with the skilled applicant and the fact that your services might not be needed at this time. The business owner has little incentive to take a chance on you when his costs are magnified by government intervention in the labor market through minimum wage increases. Your chances of entering the labor market and acquiring the skills you need to find successful employment are greatly diminished by the government’s attempt to “help” you by guaranteeing a minimum wage. In other words, a minimum wage does you no good if you can’t find a job.
Let’s look at this from another angle. Suppose you manage to land that first job and you’ve demonstrated you competency by acquiring and mastering basic job skills. You are now a productive employee the business owner wishes to keep, and he gives you a raise both as a reward and as an incentive for you to remain with the company. You exude pride in your accomplishment and inwardly resolve to focus on moving up the ladder through hard work. The business owner hires a new unskilled worker and invests the responsibility of his training in you.
However, Congress mandates a minimum wage increase which instantly grants this new unskilled worker pay parity with you despite your obvious skills mastery and instantly erasing your compensation advantage. Your achievement is erased and your hard work was for nothing when it comes to pay. Yes, you know you were rewarded, but the cynic in you says that you would have been rewarded anyway by biding your time and that you needn’t have exerted yourself. You start to resent the new guy you’re training because he makes the same as you without having earned it like you did. You start to get the subtle message that it doesn’t pay to exert yourself in this society and a bad work habit begins to form.
Government interference in the market under the guise of fairness always has negative repercussions. This differs in market regulation designed to promote worker safety, protect the environment, or protect consumers from fraud. These are additional interventions designed to foster an outcome of fairness instead of insuring a level playing field on entry. When government oversteps its mandate to police fraud and unsafe practices, it ventures into an area it little understands with far reaching implications that wear at our societal fabric.
Applicants always have the ability to decide if they are comfortable with the compensation offered, and every applicant’s situation is different. An unskilled teenager looking to pick up extra spending money may have no problem accepting a low wage as a tradeoff for acquiring valuable job skills and a reference. Someone needing to support a family might require a higher wage, but might not have the skills needed to earn that wage and might be willing to work towards acquiring those skills or look elsewhere for employment. The point is that applicants are free to accept or reject an offer of employment through careful consideration of their circumstances, and a business owner should be free to offer employment and decide compensation based on careful consideration of the applicant they interview.