Recently, an opinion piece arguing for an increase in the minimum wage was run by CNN, which was authored by Sen. Tom Harkin (D-IA), Rep. George Miller (D-CA), and Secretary of Labor Tom Perez. It can be read here. Adding to this discussion is the fact that this past Tuesday, four states voted to raise their minimum wage rates, with some indexing it to the cost of living.
In this article, the authors assert that "No one who works full-time -- in this, one of the wealthiest nations on Earth -- should have to raise a family in poverty... hard work should be rewarded with fair pay of at least $10.10 per hour.
Every day for low-wage workers is filled with struggle and anxiety. We have heard from and visited with people making heartbreaking decisions about which bill to pay, which meal to skip, which growing child will get a pair of shoes this season and whether to buy a gallon of milk or a gallon of gas. For many of us, an unexpected car repair is an inconvenience; for a minimum-wage worker, it is a catastrophe."
From this, it's clear that the case for raising the minimum wage is primarily an emotional one. But may I pose a question: on what are wages based? Why is it that a software developer is paid anywhere from $40-125,000 per year on average, depending on level of experience and a fast food worker is typically paid on average $7.73/hr?
The answer lies in contribution. What is the value of this product? What is the worker contributing? Software developers are in high demand, and their job requires specialized training, making them a valuable contribution to a company-after all, not everyone is a developer. However, being a fast food worker takes extremely minimal skill, and because there is a high number of people who can do that job, wages are consequently lower.
To put this in an analogy, let us consider the following: in many how-to articles on asking for a raise, employees are always advised to never justify it on the grounds of "my expenses/cost of living have increased." Rather, base it on the contribution you are making to your employer. Show him or her that you deserve that raise because you worked to better yourself in your job, making yourself a more valuable asset.
The second fallacy in this opinion piece is the disregard for economic evidence against the minimum wage, both theoretical and empirical.
Theoretically, labor is a commodity in the market, like any other good or service. According to the economic law of demand, as the cost of a good or service rises, demand subsequently drops, and as the cost decreases, demand increases. For instance, if gas were to drop to $1.50/gallon now, one would likely see gas stations swamped with business.
The labor market works the same way. If the cost of labor is low, demand for that commodity increases. Likewise, the inverse is also true. If the cost of labor is increased, demand for labor subsequently drops, which equates to higher unemployment rates. This is particularly noticed among lower-skilled workers, who are usually the intended beneficiaries of minimum wage increases.
On the empirical evidence front, many minimum wage advocates cite the 1992 Card-Krueger study which seemed to show that raising the minimum wage in their case study state, New Jersey, did not hinder employment growth. However, there are two things that render this study suspect:
1-Alan Krueger later went on to serve as an economic advisor to a president who supports raising the minimum wage. Would this not render his objectivity somewhat suspect in conducting what is supposed to be an impartial study?
2-Study authors David Neumark and William Wascher, who have done multiple studies on the minimum wage, found in a re-examination of Card and Krueger's work by examining payroll data vs. data collected by phone surveys, that unemployment actually increased in the state of New Jersey as a result of the minimum wage increase. These same authors, among others, have consistently found that increases in the minimum wage have negative economic effects, by effectively barring the very people it was designed to help from being employed.
In conclusion, some may assume I have heartless apathy for the plight of the poor and unskilled. Let me assure you I do not. In fact, it is because I care about the poor and the unskilled worker that I oppose raising the minimum wage. I want to reduce the barriers to gaining employment for these workers, and thereby promote a higher availability of jobs.
Getting a job is hard enough these days; why should the government make it more difficult?
In this article, the authors assert that "No one who works full-time -- in this, one of the wealthiest nations on Earth -- should have to raise a family in poverty... hard work should be rewarded with fair pay of at least $10.10 per hour.
Every day for low-wage workers is filled with struggle and anxiety. We have heard from and visited with people making heartbreaking decisions about which bill to pay, which meal to skip, which growing child will get a pair of shoes this season and whether to buy a gallon of milk or a gallon of gas. For many of us, an unexpected car repair is an inconvenience; for a minimum-wage worker, it is a catastrophe."
From this, it's clear that the case for raising the minimum wage is primarily an emotional one. But may I pose a question: on what are wages based? Why is it that a software developer is paid anywhere from $40-125,000 per year on average, depending on level of experience and a fast food worker is typically paid on average $7.73/hr?
The answer lies in contribution. What is the value of this product? What is the worker contributing? Software developers are in high demand, and their job requires specialized training, making them a valuable contribution to a company-after all, not everyone is a developer. However, being a fast food worker takes extremely minimal skill, and because there is a high number of people who can do that job, wages are consequently lower.
To put this in an analogy, let us consider the following: in many how-to articles on asking for a raise, employees are always advised to never justify it on the grounds of "my expenses/cost of living have increased." Rather, base it on the contribution you are making to your employer. Show him or her that you deserve that raise because you worked to better yourself in your job, making yourself a more valuable asset.
The second fallacy in this opinion piece is the disregard for economic evidence against the minimum wage, both theoretical and empirical.
Theoretically, labor is a commodity in the market, like any other good or service. According to the economic law of demand, as the cost of a good or service rises, demand subsequently drops, and as the cost decreases, demand increases. For instance, if gas were to drop to $1.50/gallon now, one would likely see gas stations swamped with business.
The labor market works the same way. If the cost of labor is low, demand for that commodity increases. Likewise, the inverse is also true. If the cost of labor is increased, demand for labor subsequently drops, which equates to higher unemployment rates. This is particularly noticed among lower-skilled workers, who are usually the intended beneficiaries of minimum wage increases.
On the empirical evidence front, many minimum wage advocates cite the 1992 Card-Krueger study which seemed to show that raising the minimum wage in their case study state, New Jersey, did not hinder employment growth. However, there are two things that render this study suspect:
1-Alan Krueger later went on to serve as an economic advisor to a president who supports raising the minimum wage. Would this not render his objectivity somewhat suspect in conducting what is supposed to be an impartial study?
2-Study authors David Neumark and William Wascher, who have done multiple studies on the minimum wage, found in a re-examination of Card and Krueger's work by examining payroll data vs. data collected by phone surveys, that unemployment actually increased in the state of New Jersey as a result of the minimum wage increase. These same authors, among others, have consistently found that increases in the minimum wage have negative economic effects, by effectively barring the very people it was designed to help from being employed.
In conclusion, some may assume I have heartless apathy for the plight of the poor and unskilled. Let me assure you I do not. In fact, it is because I care about the poor and the unskilled worker that I oppose raising the minimum wage. I want to reduce the barriers to gaining employment for these workers, and thereby promote a higher availability of jobs.
Getting a job is hard enough these days; why should the government make it more difficult?
RSS Feed