Thoughts on the Minimum Wage

Mike Rowe has some thoughts that sound like what I have been saying of late:

From the business owners I’ve talked to, it seems clear that companies are responding to rising labor costs by embracing automation faster than ever. That’s eliminating thousands of low-paying, unskilled, entry level positions. What will that mean for those people trying to get started in the workforce? My job as an usher was the first rung on a long ladder of work that lead me to where I am today. But what if that rung wasn’t there? If the minimum wage in 1979 had been suddenly raised from $2.90 to $10 an hour, thousands of people would have applied for the same job. What chance would I have had, being seventeen years old with pimples and a big adams apple?

  • tmitsss

    My first two jobs, gas pump attendant and the guy who stamped the prices and changed the prices on groceries during the Nixon inflation. Neither job really exists now

  • Seattle Steve

    Wow, almost as good as "Nuke the whales!"

  • mx

    Funny thing about Rowe's example. Let's pop over to the DOL's CPI calculator and punch in $2.90 in 1979. What is that in 2014 dollars? Why it's $9.46. That number looks an awful lot like $10 to me. So in fact, the minimum wage in 1979 was roughly equivalent to today's $10 all along. Yet Rowe got the job anyway.

    The problem isn't the amount of the minimum wage. Rather, the problem is that minimum wage (or near-minimum wage) work has become the norm not just for high school students working after school at the movie theater, but for adult workers who might spend years earning it while trying to support a family with little realistic possibility for advancement in their careers.

  • lemet

    The problem isn't the amount of the minimum wage. Rather, the problem is
    that minimum wage (or near-minimum wage) work has become the norm not
    just for high school students working after school at the movie theater,
    but for adult workers who might spend years earning it while trying to
    support a family with little realistic possibility for advancement in
    their careers.

    This simply isn't true, very few workers earn the min. wage, its not the norm for anyone about half are under 25 (not trying to raise a family). http://www.bls.gov/cps/minwage2013.pdf

    If someone is trying to raise a family on the min. wage then their income is way down the list of problems they have.

  • ronwf

    Go to a large grocery or hardware store. Buy something. Go to pay for it. Do you always need to talk to a human being? No. You don't, do you? You can walk up to a machine, drag your selections over a glass plate, stick a plastic card in a slot and walk out the door.

    The lesson? Automation is much more intelligent and much cheaper than it used to be. So the wage level at which it pays to automate those jobs is much lower than it used to be. Thus, the argument that minimum wage can be raised because inflation has actually reduced it's buying power fails, as it does not account for improvements in automation. It also fails to account for the fact that unscheduled downtime maintenance on automation is a much lower expense than the health insurance costs and both unscheduled and scheduled downtime (e.g., holidays and weekends) that employees do. Not to mention that the capital expense of buying the automation is tax-deductible for corporations.

    To sum up: the amount of productivity/dollar out of a machine is much higher now than it was even 10 years ago, never mind when minimum wage was invented. So the point at which it pays to fire an employee (or never hire one) and put a machine in is a lot lower. Setting minimum wage above that level accelerates replacement of minimum wage employees with automation whenever possible.

  • David Foster

    "Capital expense of buying the automation is tax-deductible"...wages paid to employees are also deductible, indeed, they are deductible when paid, whereas (depending on company size, type of equipment purchased, and phase of the political moon) capital expense is often not deductible when paid but must be depreciated over a number of years.

  • ronwf

    My point was simply that capital expenditures are recoverable, it's not just money gone forever.