The minimum wage

From THE WALL STREET JOURNAL:

The Minority Youth Unemployment Act

A higher minimum wage will hurt Obama’s most loyal supporters.

One paradox of the Obama Presidency is how it has retained the support of young people and minorities despite the damage its policies have done to their economic prospects. In his latest attempt to increase the minority youth jobless rate, President Obama is proposing to raise the minimum wage.

In his State of the Union address, Mr. Obama proposed an increase to $9 an hour by 2015 from $7.25, and then indexing the minimum to inflation. “Employers may get a more stable workforce due to reduced turnover and increased productivity,” the White House says. No doubt employers are slamming their foreheads wondering why they didn’t think of that.

And don’t worry about lost jobs. “A range of economic studies,” a White House memo assures, “show that modestly raising the minimum wage increases earnings and reduces poverty without measurably reducing employment.” Note the shifty adverbs, “modestly” and “measurably,” which can paper over a lot of economic damage.

In the real world, setting a floor under the price of labor creates winners and losers. Some workers will get a $1.75 raise. Great. But others—typically the least educated and skilled—will be priced out of the job market and their pay won’t rise to $9. It will be zero.

Much more at the link.

The article continues to note tha the preponderance of the economic studies indicate that yes, increases in the minimum wage do have some job-depressing effects. Your Editor, on the other hand, prefers to look at it somewhat differently. From the chart below, it can be seen that at typical minimum wage employer, McDonald’s, the typical minimum wage positions are already paying more than the statutory minimum.

McDonald’s Salaries

1,199 employee salaries (for 174 job titles)
 

United States – All Cities

Sort:  Most Salaries Highest Paying  Lowest Paying
Updated Feb 18, 2013
Salaries in USD  United States Avg. Salary
$10k
$40k
$70k
Cashier - Hourly

173 McDonald's Salaries

$7.65/hr
$5
$10
Crew Member - Hourly

147 McDonald's Salaries

$7.66/hr
$6
$9
Crew - Hourly

56 McDonald's Salaries

$7.66/hr
$6
$10
Crew Trainer - Hourly

51 McDonald's Salaries

$8.11/hr
$7
$11
Shift Manager - Hourly

36 McDonald's Salaries

$9.74/hr
$8
$14
Store Manager

36 McDonald's Salaries

$39,297
$20k
$90k
Drive Thru Cashier - Hourly

34 McDonald's Salaries

$7.75/hr
$6
$10
Assistant Store Manager

34 McDonald's Salaries

$29,285
$18k
$42k
Certified Swing Manager - Hourly

32 McDonald's Salaries

$9.52/hr
$8
$14
Certified Shift Manager - Hourly

30 McDonald's Salaries

$9.44/hr
$8
$13
Assistant Manager

26 McDonald's Salaries

$29,990
$12k
$42k
McDonalds Crew - Hourly

20 McDonald's Salaries

$7.82/hr
$7
$9
Fry Cook - Hourly

19 McDonald's Salaries

$8.23/hr
$6
$12
Swing Manager - Hourly

18 McDonald's Salaries

$9.27/hr
$8
$12
Crew Member/Grill Cook - Hourly

17 McDonald's Salaries

$7.68/hr
$6
$9
Second Assistant Manager

17 McDonald's Salaries

$29,149
$24k
$37k
Cashier

16 McDonald's Salaries

$16,150
$10k
$25k
Team Member - Hourly

16 McDonald's Salaries

$7.69/hr
$7
$9
Restaurant Manager

16 McDonald's Salaries

$40,588
$30k
$50k
Assistant Manager - Hourly

15 McDonald's Salaries

$10.58/hr
$8
$14
Salaries in USD  United States
$10k
$40k
$70k

The reasons are both clear and obvious: if we assume that McDonald’s will not pay more than is required to hire and retain workers, then McDonald’s will be paying more than the minimum wage only if they find that they cannot hire and retain sufficient staff to maintain operations at the minimum.

Conditions vary by locality, of course: a McDonald’s in a poorer area can probably staff and maintain staff at the minimum wage for the entry level positions, while one in a more prosperous area usually cannot. McDonald’s is an international company, but most of their restaurants are owned by independent franchise holders; these are the people running the company, and taking the decisions on whom to hire and how much to pay. Whether they will be able to pay the President’s proposed minimum wage of $9.00 per hour will be another set of individual decisions.

Several years ago, an e-mail friend of mine — Yorkshire and Eric both know her as well — had no education beyond high school. She was married to a Louisiana state policeman, but she wanted to buy a car for herself, so she got an entry-level job at McDonald’s. They lived in a poor town, across the border in Mississippi, and the McDonald’s job was the best she could get.

But Jennifer — that’s her name — did something really radical: she came to work, on time, every day, and did her job to the best of her ability, and it wasn’t long before she was promoted. Before an unfortunate automobile accident, she had worked her way up, in just a few years, to being a regional manager for McDonald’s.

The lesson is simple: McDonald’s and the other typical minimum wage employers will give people chances, and they know that they are going to go through a lot of employees who aren’t worth even the minimum wage, employees who are unreliable, employees who cheat, employees you just plain don’t want to have, but they also know that there are some real finds like Jennifer in the crowd . . . and they give those people a chance, and they give them responsibility, and raises, as they prove they can do the job.

Not every minimum wage employer is like McDonald’s; some simply aren’t large enough to offer a path for promotion. A lot of them are the mom-and-pop small businesses, the types of places our friends on the left say that they want to see survive against the cutthroat competition of the wicked WalMart, but these are precisely the types of businesses which will be hurt most by a minimum wage increase of 24%. In their struggles to make end meet and keep their businesses afloat, a 24% increase in the wages which must be paid to their employees — along with concomitant increases in the employers’ share of Social Security and Medicare taxes — will make some of these businesses untenable. In higher wage areas, those types of businesses are mostly paying more than the minimum wage anyway, for the same reasons that McDonald’s in such areas are, and an increase in the statutory minimum will less effect upon them. But in less prosperous areas, the effects will be devastating on some businesses.

The minimum wage is a blunt instrument. It is set nationally, without any regard for the fact that not every state, not every region, not every county in a
given state, has the same economic conditions. Rents will be higher or lower, other costs of living will differ, and the pay for non-entry-level jobs will vary. $7.25 an hour simply goes further in some places than it does in others.

The right thing to do is simply abandon the minimum wage, and let the economy set wages. If an employer will not pay a wage which meets local economic conditions for hiring and retaining workers, he will be disciplined by the marketplace to either pay more, or not have enough employees to operate.