Fletcher: The effects of minimum wage
A quick study of the effect of government setting a minimum wage is a great way to study the effect of barriers to work and artificial pricing as opposed to market equilibrium price points.
Discussing minimum wage is easy to understand because the majority of jobs at that level do not have fringe benefits associated with them. It’s a study, for the most part, of pure wages.
The jobs I performed at my Dad’s motel and restaurant when I was 13 are mostly against the law today. I cut the grass, gathered and transported motel room linens, operated industrial laundry machines and worked around hot and sharp restaurant equipment. Today I think all those duties at 13 are outlawed by various government entities. At one time young people could perform such duties but that no longer is the case because of government regulations. Those rules, while justified, impede entry into the work world.
As minimum wage has increased over the years, certain jobs have decreased. Consumers started pumping their own gas and cleaned their own windshields. Minimum wage clerks aren’t needed as much as consumers purchase items from the Internet.
Productivity also has to be considered. These days employees not only have to be trained, they have to be cross-trained in every job where they work. Several years ago my old classmate Bill Worthley, who worked in Flint for General Motors, asked “Do you want these guys all to make $100,000 a year” in regards to a discussion on wages. I replied that I did so long as their productivity warranted it.
Actually, the wage rates and the productivity are both up in those plants today but business is done differently now than it was then. Minimum wage jobs still exist, but that’s often because they require minimum skills. As skill levels in an employee increase, generally, so do the wages associated with the skill set. If minimum wage increases, entry level employees with low skill levels get hurt because employers start changing the way the service is provided.
The automation of the City of Alpena’s water meters is a good example. There is some talk about how a customer will now be able to get on their computer and view their water consumption. Even so, I don’t know what you can do with the information. Do you not flush or do you stop the washing machine? Regardless, a meter reader is going to be paid very close to minimum wage.
A recent letter to the editor was correct in blaming politicians for the minimum wage controversy. It’s interesting to see the guardians of the downtrodden are all for this increase but the people it will affect adversely are the least skilled of the labor force. Generally, these are the young who are just starting out in the workplace. The least equipped of these folks will get clobbered in the work world as automation takes over more and more traditional minimum wage jobs.
To increase wages for low skill level workers, we must first improve their skills. For employees to get paid more, more productivity has to be shown first.