What if the Wage Isn't Required for Living?

For those who are new to my blog, I run recreation sites like campgrounds, mostly with retired people as labor.  Retired people love these jobs, because they are looking for a nice place to live for the summer in their RV.  Often they are willing to work just for their site and utilities, though as a private entity I must pay them minimum wage as well (when they work for the government, they don't get paid).  We sometimes get into odd situations -- for example, because of a disability payment or Social Security limits, it is not unusual I have employees that ask me if I could not pay them or pay them below minimum wage, and I have to tell them no (minimum wage is absolutely required, even if the worker begs to be paid less).

This relationship works out well.  The retired persons bring conscientious and low-cost management to the campgrounds.  Our employees, who usually are living comfortably off their retirement savings or pension, get a few extra bucks and a nice place to live for the summer.  These folks may work a bit slow, but I can afford that at $6 an hour.

But what happens when a state like Maryland, because it's got its blood up against Wal-Mart, passes a $11.30 "living" wage?  A number of problems result.  First, a camping night generally consumes, on average, about an hour of labor.  At $6 an hour with 22% burden for payroll taxes and workers comp, this totals to $7.32  per night of camping in labor.  At $11.30 an hour, this totals $13.79 per night of camping.  Most of our campsites are tent camping sites and more primitive natural campgrounds (see here) and a typical price for a night of camping is $16.  This is a very low price for camping when compared to large RV parks, and makes our sites particularly popular with lower income people.  The Marlyland minimum wage would add at least $6.50 to this price, or increase prices by 41% in one swoop.  And this is before considering second order cost increases in other purchased goods and utilities due to the minimum wage increase.

The other problem is one I would have thought so obvious that it is amazing to me that no one seems to talk about it -- not everyone earning minimum wage is trying to live on it.  Certainly people new to the work force are one example, as they are often willing to trade lower initial wages for training and experience and a work record and other valuable but non-quantifiable benefits.  In my case, while I am perfectly happy to tolerate lower productivity from older, retired workers at $6 an hour (the average age of my employees is over 70), when wages are forced arbitrarily to over $11, then I have to think about changing my business model, substituting younger workers for older folks.  As any economist would predict, lower productivity workers get pushed out of the market.

For more on this topic, I discussed four case studies in my business dealing with the minimum wage.

  • tim

    I don't understand how, if I am supposedly free, the government can bar me from selling my time at less than what they determine to be the minimum. The argument from the left regarding abortion is that the government can't tell me what I can and can't do with my own body. If that is the case then where do they get off telling me what I can and can't charge for my time? Seems like a glaring double standard from the left.

    In my business we used developmentally disabled people to sort bulk mailings. They had diminshed capacity and even at minimum wage they were not as efficient as a machine. When they raised minimum wage, we went with the machines. It didn't make sense to use people at that point. And if I wanted, I could just cut a check to a chairity for developmentally disabled people and at least that was tax deductable. The problem is, that just like non-developmentally disabled people, these people gained a sense of worth from the work that they did and it was better than sitting in the day room watching Opra. Plus they got to keep the money they earned so they had something to spend.

    Frickin' shame if you ask me.

  • "I don't understand how, if I am supposedly free, the government can bar me from selling my time at less than what they determine to be the minimum."

    It's simple. The Gov doesn't consider you qualified to make that negotiation. These people (working for the minimum) are part of the oppressed masses and must be protected from their vile capitalist oppressors (such as the host of this blog.)

    /snide_remarks_off

  • dearieme

    Forgive an ignorant foreigner, but couldn't a lawyer find some part of your federal Constitution that could be construed as forbidding this?

  • John Dewey

    "couldn't a lawyer find some part of your federal Constitution that could be construed as forbidding this?"

    One would think so. However, the Supreme Court has shown that it doesn't have to pay much attention to the Counstitution.

    In West Coast Hotel vs. Parrish, 1937, the Supreme Court ruled that a state could establish minimum wage laws. They basically held that the constitution permits restrictions on liberty of contract where such restrictions protect vulernable groups.

    West Coaast hotel vs Parrish

  • CT_Yankee

    My son is a business major in college, and has worked unpaid and barely paid internships. He gets experiance and a reference for later, when he looks for the big $$$, but I doubt he earns enough to pay for the gas to get to work. If his employers had to pay minimum wages, or worse, if those minimum wages rose, would these businesses still want to take the time of thier profitable experianced employees to teach students like him how to succeed?

    Many of the minimum wage entry level positions are trying to teach valuable work skills you may take for granted. Show up, preferably ontime. Don't curse at the customers. Perform some actual work, even if it is boring.

    Minimum wage, like the internship programs, is not the destination. It is one of the first steps (after, and often mixed with, education) to a career. Raise or block the first steps and it is like the bottom of a fire escape. You can see the stairs going all the way up, but how do you get to them when you can't reach the ground floor level ladder.

  • Frank S

    dearieme,

    While the end result of these "living" wage proposals is a national mandate (remember, it's not a slippery slope fallacy when it's the actual desired end-state of the proponents), I don't have an issue with each state making whatever idiotic labor cost pricing laws they can dream up. The point of the constitutional republic is to constrain the federal government and give the states great leeway. Some states will embrace socialism and some will tend to leave people alone. And people would be free to move to whatever state meets their standards. A free market in choosing what government to live under, essentially.
    But of course nowadays the Constitution has little say over what the federal government actually does, and each state is quite constrained by federal regulation to make the experiments between the States hold much water. But when it comes to dictating the minimum wage for workers in a State, I'm not sure what the federal Constitution can say about it. But a disclaimer: just like politicians in DC, I'm no Constitutional scholar.

  • hanmeng

    Where are the "consumer groups" when the politicians want to do these things that jack up prices for all of us?

  • Tim

    Coyote,

    I know you've thought of this, but could you charge your employees for their RV spot, so that this would discount the higher wages you're forced to pay? Or is there any way to change this into contract work? Your contractors (former employees) bid for the summer job; your costs would be lower in more desirable locations, etc.

    I'd love to hear of the different workarounds you've thought of/tried to solve this problem, and why you don't think they work. And what you see as the limitations of making someone a contractor.

    It's a pain to have to spend so much time/energy to work around government regulation, but that's the reality of the situation. In my line of work (computer field) it seems more and more work is being done on a contract basis, which allows a lot more flexability between customer and contractor.