Category Archives: Minimum Wage

Supply And Demand: Labor

Supply DemandThe minimum wage debate is heating up again.  On the Left, we have those that think the minimum wage needs to be raised.  Those of us on the right, disagree – we either think that the minimum wage is set just fine, or, if you are more honest, would like to see the concept abolished completely.

Sadly, the debate doesn’t come down to facts and science.  Rather, one side is using populist rhetoric while the other tries and tries to polish an unpopular message that setting a price floor results in surpluses.

Listen to the debates and you’ll hear what I’m talking about  Just this morning I was listening to The Diane Rehm Show and her panel was discussing the minimum wage.  The two supporters of the law invoked such constructs as “The minimum wage hasn’t kept pace with inflation” and “The purchasing power of the minimum wage is lower than it was 60 years ago”.

These things, while true, have nothing to do with the debate of whether or not a minimum wage is a good thing.

And it doesn’t end there.  I’ve heard the debate move into the fact that as the Holiday Season approaches, the republicans actually wanna end unemployment benefits just as people are trying to pay for heat in their apartments.  That as the gift giving intensifies, the republicans wanna take away the money that a growing number of people are dependent upon.

Again, tugs of populism that have nothing to do with the underlying facts of the minimum wage.

The above diagram is the Supply – Demand curve showing market equilibrium at point P and Q prime; where the two curves intersect.  Slide price up and demand is reduced while supply is increased.  And if that price happens to be above that market clearing price – you end up with a surplus of the commodity; in this case – labor.

This is undisputed.  There is no arguing this.

So, my conversation In Real Life are beginning to change when it comes to the minimum wage.  I’m beginning to point out that minimum wage jobs are NOT MEANT TO SUPPORT A FAMILY.  They are, in fact, meant to be transitory jobs that provide employers with inexpensive labor and provide laborers invaluable On The Job Training.

Looking further into the data suggests that less than 3% of wage earners make the minimum wage.  And of those, a decent number live in a household making the median income.

Another aspect of my conversations is this – and it’s critical – it MUST be acknowledged that both myself and my friend I’m debating admit that each of us is acting in manner that we think would benefit the marginal employee; the guy making the minimum wage.  Without such acknowledgement we are debating intention and not policy.  And when it comes to intention, I have no use for that brand of people who think that I want some people to have a worse life in order that I have a better one.

Wage Gap – Employment Gap

Increasing Bar GraphThe argument has long been, “The rich get richer while the poor get poorer.”

There are two problems with the statement:

  1. The people who make up the poor and who make up the rich change over time.  This is especially true when rich and poor are defined by wages only.
  2. This argument never takes into account “externalities”

For example, the argument never admits that we are looking at families and not individuals.  As such, it would be valuable to look at how families are changing over time.  But we never get that.

Additionally, it would be important to look at education and how it  has changed over time.  Again, nothing.

But today we have a new report that provides insight:

WASHINGTON — The gap in employment rates between America’s highest- and lowest-income families has stretched to its widest levels since officials began tracking the data a decade ago, according to an analysis of government data conducted for The Associated Press.

Rates of unemployment for the lowest-income families — those earning less than $20,000 — have topped 21 percent, nearly matching the rate for all workers during the 1930s Great Depression.

U.S. households with income of more than $150,000 a year have an unemployment rate of 3.2 percent, a level traditionally defined as full employment. At the same time, middle-income workers are increasingly pushed into lower-wage jobs. Many of them in turn are displacing lower-skilled, low-income workers, who become unemployed or are forced to work fewer hours, the analysis shows.

Amazing.  And truly heart breaking.  The very folks that need, and I mean NEED, a job are faced with unemployment levels that make it virtually impossible to find work.

A rational policy decision would be to make work as easy as possible to give away.  That is, let these people find and accept a job anywhere they can for whatever wage they can.  Ironically, the administration that most of these folks feel are helping them out are really hurting them the most.

One of the most devastating things that can happen to a worker out of work is to see the wage of the jobs he wants raised above his reasonable level of productivity.  This has the effect of discriminating against him for no reason other than he lacks the skills to obtain better work; skills that are often learned while working.

Don’t forget the history of the minimum wage:

Did you know that there was a time in our country, after the Civil War, when white unemployment was higher than black unemployment? It seems almost unfathomable now, but that was the case in the early decades of the 20th century. This was intentionally changed after Congress enacted the first federal minimum wage law: the Davis-Bacon Act of 1931.

As most of us remember from history class, the 1930s saw a plethora of public works projects introduced to combat the unemployment associated with the Great Depression. (Whether or not this worked is a topic for another day.) But during that time, many impoverished blacks left sharecropping to come north in search of such jobs. The Davis-Bacon Act was created specifically and explicitly to prevent blacks from “taking” these jobs from local white workers.

Congressman Robert Bacon of New York began crafting various pieces of legislation to discriminate against black workers when a black construction crew from Alabama was brought to his state to build a hospital for veterans in 1927. Because most blacks lived in the South, any laws restricting the use of migrant labor discriminated against them. Since blacks were not admitted to trade unions, any law that favored union labor automatically excluded blacks. Bacon submitted 13 such bills over the next four years, culminating in the Davis-Bacon Act.

The act mandated that federal contracts pay their workers the “prevailing wage.” As innocent as this might sound, records of the debate over the bill reveal that everyone understood the “prevailing wage” meant the union wage and that this meant there would be no blacks working on federal projects. In fact, when testifying before the Senate in favor of Davis-Bacon, American Federation of Labor union president William Green complained, “Colored labor is being brought in to demoralize wage rates.”

The federal minimum wage may no longer be racist in intent, but it is still racist in its effects. Labor is affected by supply and demand, just like anything else. If we pass a law that raises the cost of printer paper to $100 a ream, companies will find a way to use less printer paper. In the same way, when the law raises the cost of labor, companies purchase fewer hours of labor.

The history of the minimum wage was SPECIFICALLY meant to discriminate against black workers.  And the effects of that law have created the condition we see today.

If I Had A Dream


If I had a dream, it would be that all people, regardless of color or nationality, would have the same shot at success that I have.  And in the glow of the 50th Anniversary of Martin’s speech, I am depressed that we aren’t there yet.

And infuriated that the policies of the Left, who claim to have the best interests of black America as their goal, has made it so much harder than it has to be:

The history of black workers in the United States illustrates the point.  As already noted, from the late nineteenth-century on through the the middle of the twentieth-century, the labor force participation rate of American blacks was slightly higher than that of American whites.  On other words, blacks were just as employable at the wages they received as whites were at their very different wages.  The minimum wage law changed that.  Before federal minimum wage laws were instituted in the 1930’s, the black unemployment rate was slightly lower than the white unemployment rate in 1930.  But then followed the Davis-Bacon Act of 1931the National Industrial Recovery Act of 1933 and the Fair Labor Standards Act of 1938 – all of which imposed government-mandated minimum wages, either on a particular sector or more broadly.

The National Labor Relations Act of 1935, which promoted unionization, also tended to to price b lack workers out of jobs, in addition to union rules that kept blacks from jobs by barring them from union membership.  The National Industrial Recovery Act raised wages in the Southern textile industry by 70% iin just five months and its impact nationwide was estimated to have cost blacks half a million jobs.  While this Act was later declared unconstitutional by the Supreme Court, the Fair Labor Standards Act of 1938 was upheld by the High Court and became the major force in establishing a national minimum wage.  As already noted, the inflation of the 1940’s largely nullified the effect of the Fair Labor Standards Act, until it was amended in 1950 to raise minimum wages to a level that would have some actual effect on current wages.  By 1954, black unemployment rates were double those of whites and have continued to be at that level or higher.  Those particularly hard hit by the resulting unemployment have been black teenage males.

Even through 1949 – the year before a series of minimum wage escalations began – was a recession year, black teenage male unemployment that year was lower than it was to be during the later boom years of the 1960’s.  The wide gap of unemployment rate of black and white teenagers dates from the escalation of the minimum wage and the spread of its coverage in the 1950’s.  The usual explanations of high unemployment of black teenagers -inexperience, less education, lack of skills, racism – cannot explain their rising unemployment, since all these things were worse during the earlier period when black teenage unemployment was much lower.  Taking the more normal year of 1948 as a basis for comparison, black male teenage unemployment then was less than half of what it would be during the decade of the 1960’s and less than one-third of what it would be in the 1970’s.

Unemployment among 16 and 17-year-old black males was no higher than among white males of the same age in 1948.  It was only after a series of minimum wage escalations began that black male teenage unemployment not only skyrocketed but became more than double the unemployment rates among white male teenagers.  In the early twenty-first century, the unemployment rate for black teenagers exceeded 30 percent.  After the American economy turned around in the wake of the housing and financial crisis, unemployment among black teenagers reached 40 percent.

The juxtaposition of the stories this week, Martin’s speech and the fast food worker’s strike, is a simple lesson of a sublime dream turned into nightmare by the policies of a party gone horrible wrong.

Wherein Pino Is Fine With A Worker’s Strike


I’m harsh on labor unions.  In today’s world – and for much of the time I’ve been alive, labor unions have been the scourge of life.  Nothing but sucking the productive forces of our economy and lining their pockets off the backs of the workers.

Actions truly worth protest march.

Anyway, today there is a semi-nationwide strike:

Workers at the nation’s best known fast-food restaurants in seven cities across America are planning to walk off the job Monday to protest what they say are wages that are too low to live on. In a move orchestrated with the help of powerful labor unions and clergy groups, the workers plan to strike for a day to demand their wages be doubled.

The Washington Post reports that the protests will take place in New York City, Chicago, Detroit, Milwaukee, St. Louis, Kansas City, and Flint, Mich., involving workers at McDonald’s, Burger King, Wendy’s and KFC. Some employees at stores including Dollar Tree, Macy’s and Victoria’s Secret are also expected to join the protesters in several cities.

The workers are calling for wages of $15 per hour, more than double New York’s current minimum wage of $7.25.

As far as I can tell, these workers are not represented and actually could be fired if their employer so desired.

THAT is the type of labor protest that I can respect!

I remember, years ago, working in a catering gig when the boss, a reasonable man, offered me a promotion running a cafeteria at a local community college.  WAY more responsibility and work, staff and everything.  When I asked what my raise would be he said, “There wouldn’t be a raise, just the opportunity.”

Knowing that my field of choice was not going to be in the food industry I declined claiming that the money didn’t justify the effort.  He mentioned that he could just change my assignment and force me to report to my new job Monday.  I told him that he could, but that he wouldn’t want to have to train me and then my replacement in a matter of 6 weeks.

So I GET the fact that people don’t wanna work for less money than they feel they ought to.  And I think that they SHOULD walk out if they feel strongly enough.

Good for these guys and gals.

What I oppose is the racket that is the union basically legislating rules that tip the balance in their favor.

However, the grievances these guys make are less than compelling:

“A lot of the workers are living in poverty, you know, not being able to afford to put food on the table or take the train to work,” Fast Food Forward director Jonathan Westin told CBS New York. “The workers are striking over the fact that they can’t continue to maintain their families on the wages they’re being paid in the fast-food industry.”

Simple fact – these jobs are not meant to support families.

Robert Wilson, Jr., a 25-year-old McDonald’s employee in Chicago, told The Washington Post that he makes $8.60 an hour after seven years on the job. A previous walkout in April led to “small victories,” he said, including additional hours and slight raises.

Simple fact – These jobs are not meant to be stayed at for 7 years.

The truth is that these jobs are meant to be entry level low paid gigs that, in addition to paying money for baseball cards and skateboards, teach young people work ethic, job skills and interpersonal skills.

These jobs are MEANT to be worked for a year or 3 while in school and then left for greener pastures.  These employees are being underpaid, they are overstaying.

Youth Unemployment – Unfinished Story

The Atlantic

The Atlantic had me at hello, but lost me at, “wanna dance”:

Europe’s unemployment inequality is simply astonishing. Germany’s jobless rate for young people is 8.2 percent. In Greece, it’s 54.2 percent.

Elevated and lasting unemployment is an awful thing, anywhere, and for anyone. But it is awful in a special way for young people, cutting them off from networks and starting salaries at the moment they need to forge connections and begin to cobble together a career.

A truly honest take on the impact of youth unemployment.  The first rung of the employment ladder doesn’t contain money so much as “stuff”.  Things like speaking to customers, showing up on time, meeting other people in your field and developing a work ethic that is rewarded by promotion.

Money is nice, but at age 16, 17 and 18 is largely unimportant; parents and all.

Yet we never remember this as we craft legislation, minimum wage laws anyone, that punish our youth mercilessly.  In fact, if you wanted to purposely handicap a nation, enforcing a minimum wage law that results in youth unemployment, would be near the top of the list.

But The Atlantic never goes any further than reporting on the symptom, never mentioning the cause.

So close.