“The True Minimum Wage”

Last updated on: January 5, 2016 at 11:53 am by Jane the Actuary

“The True Minimum Wage” 2016-01-05T11:53:06-06:00 Jane the Actuary

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That’s something that was floating around, with respect to the minimum wage: “the true minimum wage is zero, because the higher you increase the minimum wage, the greater the unemployment rate will be, particularly for individuals who neither have skills nor experience, even the basic experience of working at a job at all.”

But here’s something else I was thinking of: if you’re self-employed, there is no minimum wage.

Yesterday, for some reason, I ended up at a post by The Anchoress at Patheos with her thoughts on covering one’s head while praying, to bump up the focus level. I don’t recall where the link came from, because it was an old post. But in that manner in which you sometimes just find yourself following one link after another, I ended up at the site of a woman who sells handmade Jewish headcoverings, and then was reminded of the days when I used to read the Mommy Blogger genre, where (for instance, on “Frugal Friday” when the blog hostess invited readers to share links to frugal tips on their own blogs) you could end up reading all manner of blogs by conservative stay-at-home, homeschooling moms, some of whom had home businesses in order to bring in an income while continuing with their family duties. More than one of them had a home business making “modest clothing” that they sold through their websites, and pulled in their older daughters to help.

Now, when I tried to find these sites, I wasn’t able to, with a few exceptions, from a modest clothing directory: The King’s Daughters, for instance, or Jumpin Bloomers. But one imagines that their hourly wage is quite small, even though their prices are certainly higher than what you’d pay at a retail store.

And Megan McArdle occasionally talks about the world of Etsy crafters, earning a painfully low hourly rate because they either fail to calculate their expenses and profits, or consider the profit to be secondary to the opportunity to refine their skills, or, in fact, simply need flexible, at-home work and accept the low hourly wage.

And of course there are plenty of “real” small businesses where the owner earns so little, relative to the time invested, that they’d be better off, financially, getting any other sort of job where the law demands that they be paid minimum wage.

Which is a different sort of unintended consequence to minimum wage laws. What if, for instance, one of these Etsy crafters or home sewers found themselves experiencing enough success as to hire some outside help — a neighboring teenager, for instance? Other than declaring her to be an “intern” or paying her under-the-table, they’d be bound to a minimum wage law that would exceed the business owner’s own pay.

So that’s about all I know — just “food for thought.” Have any readers owned a small business, even something as simple as selling Pampered Chef products? In the real world, what’s the effective minimum wage?

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