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It’s not that we hate the poor…

Posted by Chance on August 7, 2008

Economic conservatives are criticized because of seemingly heartless opinions, for instance, the stance on the minimum wage. But I don’t oppose the minimum wage simply because I hate poor people, or I don’t care about the least of these… just the opposite.

The Political Calculations Blog writes

This chart confirms that for teenagers, those between the ages of 16 and 19 years old, all of the jobs that disappeared in 2007 were minimum wage jobs. In essence, a total of 94,000 hourly jobs disappeared for this age group overall. This figure is the net change of this age group losing some 118,000 minimum wage earning jobs and gaining some 24,000 jobs paying above this level.

This represents what we believe to be the effect of the higher minimum wage level increasing the barriers to entry for young people into the U.S. workforce. Since the minimum wage jobs that once were held by individuals in each age group have disappeared, total employment levels have declined as those who held them have been forced to pursue other activities.

Now consider this: The minimum wage was just reset on 24 July 2008 to $6.55 per hour, a 27.2% increase from where it was in early July 2007. Our best guess is that a lot of additional teenagers will be pursuing those other activities.

Meanwhile, the lack of employment opportunities for the least educated, least skilled and least experienced segment of the U.S. workforce will likely have costs far beyond the benefits gained by those who earn the higher minimum wage. The government might be able to make the minimum wage earning teenage worker disappear, but they didn’t do anything to make the teenagers themselves disappear.

Now, with any economic research there are tons of variables, but the conclusions presented are intuitive, simply because of supply and demand. If something is not truly worth the price at which it is offered, we don’t buy it. Why would an hourly worker be any different? Companies with inferior products price them lower to increase demand. Why wouldn’t an unskilled laborer be the same? Why should an unskilled laborer not have the option to negotiate their wage without government interference? Is a job with a low wage worse than no job at all?

Many politicians realize that raising the minimum wage does no good, yet they support it to pay lip service to their constituents. Others think they have the companies in a bind. They know Safeway needs workers, so they think Safeway has no choice but to pay them the mandated wage. But Safeway can hire fewer workers, create more self checkout lines, or raise the prices of their goods, which has the most dramatic effect on the poor anyway.

Hat tip to the Market Power Blog.

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2 Responses to “It’s not that we hate the poor…”

  1. Dwight said

    A few points;

    There’s no mention of what increased wages might do for those very companies paying a higher wage. They get it back from those workers (the same logic as the recent stimulus package)

    I don’t think the min. wage should increase so significantly all at once. But the reason that it has to is because the GOP is able to oppose increases for a decade or more. If we had much smaller increases every year that were reliable and could be made account of, instead of our current system we’d be better off.

    Presumably we could have 100% unemployment if the minimum wage was a $1 but there’s a recognition in the wider society that a full time job should be able to pay for basic necessities, housing, etc.

    But in some respects wages are being kept artificially low on two counts. First, social programs that provide provisions for workers because their income isn’t enough. That is, instead of companies providing a living wage, we have government subsidizing those companies’s workers with health care, housing aid, etc. So they can continue to pay low wages on the taxpayer dime.

    Secondly, there is no organized labor movement really in the service sector, so there’s no organized pressure that can make wages grow, what less reflect worker’s work and productivity. It’s an obsession by some on the right (and in recent news reports by Walmart as well) to keep unions out.

    The result is that our biggest poverty problem is not that people won’t work. They do, it’s that they can’t make a living wage. To be honest I haven’t seen either party do things to seriously address that issue though the dems have done some interventions like the minimum wage increase

  2. Excellent post, great looking weblog, added it to my favs.

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