Sunday, February 17, 2013

Raising Minimum Wage Will Keep Your Failure to Launch Kids in the Basement Much Longer

Source: American Enterprise Institute
I just heard a supposedly respected voice for business make the most ignorant comment about minimum wage. Indeed he endorsed the President's call for a $9.00/hr min wage saying that the current minimum wage wasn't enough to 'sustain a family.' The comment was made with an incredulous gosh-I-can't-believe-anyone-would-be-against-such-a-great-idea kind of voice. But he's the same person who said the government should make fast food restaurants "illegal" so I don't know why I'm surprised.

Dude, the minimum wage was never meant to 'sustain a family.' It's a starter wage for inexperienced souls who need some skills, and who will, in a few short months, be making MORE than the minimum wage. Most of those inexperienced souls are...your kids. 

At a time when the President claims he's trying to "create jobs" the laws and supply and demand dictate that making something more expensive decreases the demand. Does he think he can sign an executive order and repeal the law of supply and demand too? You think the youngins have 

failure to launch problems now? Just raise the minimum wage rate and see how long it will take them to get a job. 

The President's spending policies and priorities have served to make the unemployment problem worse. His policies dismantle the economy, keep workplace participation lower and unemployment higher,  and with this pledge he now wants to redistribute more and exacerbate the problems in the economy by raising the minimum wage. 

He makes the problem worse--dispiriting so many workers that they leave the work force, asks employers to give the remaining workers a raise, while keeping the unemployment rate high. What's his true North here, Spain? (Spain has a 25% unemployment rate).

Read these bullet points about Minimum Wage (all are pre Great Recession/Obamaconomy)
1. Lobbied by unions because it reduced their competition. 2. Was originally an attempt by (mostly white) labor unions to reduce access to jobs for blacks. 3. Prices low skilled workers out of the job market; especially bad for teens, minorities, people without advanced education. 4. Robs teens of on job experience they use to build success. 5. Most on minimum wage stay there for only a few months (unless it's too high) 6. Most people on minimum wage are in household of other (living with parents most often). 7. 20% live in poverty. 80% do not. 8. Nearly 60% work part-time. 9. Most Min Wage earners are under 25 years old.
Source: Work Source Oregon
And how does a high minimum wage work in a flagging economy? Just ask Oregon where it has the third highest minimum wage in the country at $8.95/hour (San Francisco is first, Washington state is second). Between the start of the recession and now, youth unemployment RATE INCREASED BY 63% for 16-19 year olds and 60% for 20-24 year olds. The actual unemployment rate is  
Graph 3shows national data for the percentage point increase in unemployment rates by age group between October 2007 - before the start of the recession - and October 2011. It is worth noting that this large jump in rates for youth is the change in percentage points, rather than percent change. Because youth unemployment rates were higher than other groups back in 2007, the greatest percentage change in unemployment rates occurred for those ages 60 and older, up 130 percent over that time. Youths age 16 to 19 and those ages 20 to 24 had more modest percentage increases, 63 percent and 60 percent, respectively, over that time.
In 2010, Oregon's teens had the third-highest unemployment rate in the nation, behind only California and Nevada. For the last several years (2006-2008) Oregonians ages 16 to 19 years had an unemployment rate above 16 percent, and the rate for those ages 20 to 24 was near 10 percent. The 2009 spike took the teen unemployment rate above 30 percent and the rate for those ages 20 to 24 surged to 17 percent. In 2010, rates for those age groups fell slightly, to 28.8 and 14.4 percent, respectively.

From the policy archive back in 1987 we find:
"The negative effects of the minimum wage are greatest for minorities, especially black male teenagers. The reason: it makes employers more choosy about whom they hire and encourages them to hire only proved, dependable employees. The higher the minimum wage, the more dependable, skilled, and productive the candidate for a job must be if he or she is to produce more for the employer than the higher wages. This is why the impact is mainly on lower-skilled teenagers and not on adults, why the impact is greater on males than on'females, and why the impact is greater on blacks than on whites."
Even the New York Times saw the built in folly of the minimum wage, editorializing in 1987:
Raising the minimum wage by a substantial amount would price working poor people out of the job market. A far better way to help them would be to subsidize their wages or - better yet - help them acquire the skills needed to earn more on their own.If a higher minimum means fewer jobs, why does it remain on the agenda of some liberals? A higher minimum would undoubtedly raise the living standard of the majority of low-wage workers who could keep their jobs. That gain, it is argued, would justify the sacrifice of the minority who became unemployable. The argument isn't convincing. Those at greatest risk from a higher minimum would be young, poor workers, who already face formidable barriers to getting and keeping jobs. Indeed, President Reagan has proposed a lower minimum wage just to improve their chances of finding work.
Who are the minimum wage workers? This table is from the Heritage Foundation from 2006---before the Great Recession/Depression II but it's illustrative of the folks we're talking about.
Table 1
Demographic Characteristics of Minimum Wage Workers
16-24 years old 25+ Total
Men 35.2% 33.6% 34.4%
Women 64.8% 66.4% 65.6%
White 83.6% 79.5% 81.7%
Black 11.1% 11.8% 11.4%
Asian 1.7% 5.4% 3.4%
Married 4.8% 42.5% 22.5%
Wage and Income Characteristics of Minimum Wage Earners
Part Time 67.0% 55.6% 61.7%
Full Time 33.0% 44.4% 38.3%
Avg. family Income $64,273 $33,606 $49,885
At or Below the Poverty Line 16.9% 22.8% 19.5%
family Income > 200% of Poverty Line 64.7% 44.8% 56.1%
education Levels of Minimum Wage Workers
Less Than High School 36.3% 22.0% 29.8%
High School Graduate 20.9% 38.5% 29.1%
Some College 35.6% 20.5% 28.5%
Associates Degree 3.4% 8.5% 5.8%
Bachelors Degree or Higher 3.4% 10.6% 6.8%

Source: Heritage Foundation calculations based on the Bureau of Labor Statistics, 2005 Current Population Survey and merged outgoing rotation group files


  1. Blatantly stolen comment from another blog...

    "Jumping to $9/hr Fed minimum wage is brilliant. In fact, it doesn’t go far enough. We should just go to $216.35/hr so we all hit the new $450k higher-tax bracket and all our deficit/debt ills will be solved overnight. Genius!"