On the minimum wage

Last updated on: December 12, 2013 at 10:16 pm by Jane the Actuary

On the minimum wage 2013-12-12T22:16:00-06:00 Jane the Actuary

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Every now and again there’s an article or a blog post or an opinion piece on the minimum wage that I intend to link to and comment on, but time gets away from me. In any case, I wanted to work out some of my thoughts on the minimum wage while I have some time.

There is no simple answer for what the “right” minimum wage should be. The difficulty is that the minimum wage really would (if it were to be set from scratch) need to balance two competing goals:

It should be sufficient for an individual to support him/herself at a basic, but not substandard level, without the need for government subsidies (except, I’d say, for healthcare/health insurance). “Basic” means such things as no meals out, a basic studio or shared apartment, mass transit rather than car ownership, thrift store shopping, etc. It does not mean living 10-to-a-room in the way that some immigrants do in order to send as much cash back to their families.

At the same time, only the least-skilled jobs should be paying minimum wage — jobs which require some kind of specialized training, whether it’s general skills (secretarial skills, forklift driving) or skills specific to the employer and acquired on-the-job, should not be paying minimum wage. The various stories of people working at McDonald’s or elsewhere for decades and never earning any more than minimum wage are a sign that the minimum wage is too high, in that respect. Unless these individuals, despite their years of experience, are not any more productive than a new hire (showing up late or unreliably, unable to work independently, etc.), this really shouldn’t be happening.

(I remember my first job – $3.35 an hour at the dry cleaners. Standard policy was a 50 cent raise after the first year, and again a year thereafter. Then the high school girls they always hired went away to college, so I have no idea what the longer-term day shift workers got, or when they ceased to get raises.)

So what’s the answer? I’m inclined to think that the minimum wage is at a level where an individual could support himself at this basic level, at least in areas with lower cost of living — which is supported by some “living wage” websites, if you assume a shared housing situation. (That is, a website which I can’t find right now was showing “living wage” minimums for a dual income couple that were at the minimum wage level.) Realistically, could you lower it much and still meet this criterion? Probably not — and I do think that, even though teenagers might benefit from a sub-minimum job which provides enough extra cash for spending money, there is a certain basic justice issue in this minimum standard. (*Though I have no problem with a “training wage” where an individual is receiving genuine instruction from the employer, or is for whatever reason, not able to work to a reasonably-productive standard.)

Yet, there’s clearly something wrong with the whole wage structure right now. What’s the right answer for when the economy is just not in a reasonable equilibrium, when skilled people can’t find skilled jobs, when there are too many people chasing moderately skilled jobs so as to keep wages low? I’m not really sure. (*Other than ceasing to import unskilled labor.)

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