Thursday, June 02, 2005
Minimum wage:
Article
In all, 17 states and the District of Columbia - covering 45% of the U.S. population - have set minimums above the federal rate of $5.15. That has helped cut the number of workers earning the minimum or less (for those earning tips) from 4.8 million in 1997 to 2 million last year, or 2.7% of hourly earners, the Bureau of Labor Statistics says.
As a matter of theory, Libertarians have always been against the minimum wage, because it hurts those at the bottom, in order to make liberals feel better.
But here's some empirical data, which suggests the harmful affects are worse than I thought.
In a country of 300 million, 2 million are getting the federal minimum wage.
About half of those 300 million live in states where the minimum is higher, so lets say the population in question is 200 million.
Half of those are in restaurants.
I suspect the restaurant numbers are wrong, by including employees who make decent money in tips. When I was a waiter, I made $10/hr, of which $3/hr was the paycheck and the rest was tips. So it's probably less than 2 million, but let's use that figure.
The federal minimum is $5.15/hr.
The liberal theory behind minimum wage is that there are n number of jobs, and greedy employers are taking advantage of the powerless to pay them less than they want. Something like that?
So there's some number of workers who would get $5/hr in a free market, but get $5.15 in the regulated economy. That extra 0.15 helps them pay social security, $0.75/hr,
and save up to pay sales taxes and property taxes and parking tickets, etc.
This does nothing for the worker who would get $3/hr in a free market, except to make his job illegal. The employer will either do without, or replace the $3/hr worker with a $5/hr worker. If it's the kind of business that can be moved to mexico or china, that'll happen. Nothing will make the employer pay $5.15 an hour to a $3/hr worker.
The factors that distinguish a $3/hr worker from a $5/hr worker include,
do they show up? on time? dressed? sober? Are they able to do useful work? Have they been at the job long enough to master the skills?
Given a choice between the $3/hr worker who comes in, if at all, naked, drunk,
this employee will be replaced with a $5/hr worker who comes on time, dressed and sober.
So minimum wage does nothing to help those who aren't worth close to the minimum already; the benefit is, let's say, at most $1/hr.
But since we are willing to assume the employer will pay more than an employee is worth on the market, isn't it also possible that there are some employees who will settle for $5.15 when they could make 5.30, or $6, somewhere else?
By interfering in the pricing process by which workers set their wages by choice of job, workers can fall into a learned helplessness. Still, they are free to leave, costs of exit are low. In contrast, it is illegal for the employer to pay less than $5.15.
So some, but not all, of the benefit to workers who get more than they would in the merket, is offset by other workers who could do better in the market, but are lulled into false consciousness by the law, and settle for less.
I'm using a lot of words here, and havent gotten to my main point yet.
Minor point I've been trying to establish is that for some of the 2 million there is some small benefit, although the benefit is less than the burden of taxation.
Meanwhile of the 200 million, there might be 20 million who don't have jobs at all,
or who work under the table in the black market informal economy. It might be 20 million or 40 million; I'll use 20.
Some are independently wealthy and wouldn't want a $5/hr job. Others though,
because they are too old, too young, too sick, too crazy, too gangster, don't speak english, etc etc, want to work but are not worth more than $4/hr on the market.
Now part of this is the liberals might not want all of them working -
they should be in retirement homes, schools, hospitals, prisons, at government expense.
But in at least some cases, the person is willing and able to work, wants to work, someone wants to hire them - at $4/hr. Or $3, or $2.
I'm suggesting, without data, that there are 2 million such people. I've been one of them. So my theory is that for every worker who receives a small net benefit from minimum wage, another potential worker is shut out of the formal economy.
And the harm of having no job, or of having one's job be illegal, is greater than the benefit of the extra 15 cents (or whatever) to the minimum wage worker.
One example: I worked in the gift shop at a gay bar for $5/hr, a few shifts a week, under the table. The rest of the time I worked on my law practice. The gift store job was an excuse to hang out at the bar without pressure to buy drinks - I was there for the social life. Was I an exploited worker?
Another example: I am mildly autistic. While I by now have a doctorate, I had the kind of education that doesn't produce any useful job skills - I can't repair a car, build a house, write code, etc. I had some rough years, as a long haired wierd kid with a bad attitude and tendency to run 15 minutes late, of not being able to find a job at all in the city I grew up in. I would have been happy to start at less than minimum at a job with advancement potential. And I was white and spoke english and was healthy - lots of other people face bigger challenges. I eventually was able to get work as a dishwasher and janitor, worked my way up to working in warehouses, finished school, failed as a lawyer, might go back to working in warehouses.
But during my hard core unemployable years, minimum wage was a real obstacle to my getting hired on anywhere I could move up the ladder.
And I thought this was just me, but the article with the numbers made me think this is more common than we realize.
I think the average voter is emotionally attached to the minimum wage for irrational reasons, and would vote irrationally in an intiative.
There's more I could say about this method of setting public policy, but this rant has gone on long enough.
Article
In all, 17 states and the District of Columbia - covering 45% of the U.S. population - have set minimums above the federal rate of $5.15. That has helped cut the number of workers earning the minimum or less (for those earning tips) from 4.8 million in 1997 to 2 million last year, or 2.7% of hourly earners, the Bureau of Labor Statistics says.
As a matter of theory, Libertarians have always been against the minimum wage, because it hurts those at the bottom, in order to make liberals feel better.
But here's some empirical data, which suggests the harmful affects are worse than I thought.
In a country of 300 million, 2 million are getting the federal minimum wage.
About half of those 300 million live in states where the minimum is higher, so lets say the population in question is 200 million.
Half of those are in restaurants.
I suspect the restaurant numbers are wrong, by including employees who make decent money in tips. When I was a waiter, I made $10/hr, of which $3/hr was the paycheck and the rest was tips. So it's probably less than 2 million, but let's use that figure.
The federal minimum is $5.15/hr.
The liberal theory behind minimum wage is that there are n number of jobs, and greedy employers are taking advantage of the powerless to pay them less than they want. Something like that?
So there's some number of workers who would get $5/hr in a free market, but get $5.15 in the regulated economy. That extra 0.15 helps them pay social security, $0.75/hr,
and save up to pay sales taxes and property taxes and parking tickets, etc.
This does nothing for the worker who would get $3/hr in a free market, except to make his job illegal. The employer will either do without, or replace the $3/hr worker with a $5/hr worker. If it's the kind of business that can be moved to mexico or china, that'll happen. Nothing will make the employer pay $5.15 an hour to a $3/hr worker.
The factors that distinguish a $3/hr worker from a $5/hr worker include,
do they show up? on time? dressed? sober? Are they able to do useful work? Have they been at the job long enough to master the skills?
Given a choice between the $3/hr worker who comes in, if at all, naked, drunk,
this employee will be replaced with a $5/hr worker who comes on time, dressed and sober.
So minimum wage does nothing to help those who aren't worth close to the minimum already; the benefit is, let's say, at most $1/hr.
But since we are willing to assume the employer will pay more than an employee is worth on the market, isn't it also possible that there are some employees who will settle for $5.15 when they could make 5.30, or $6, somewhere else?
By interfering in the pricing process by which workers set their wages by choice of job, workers can fall into a learned helplessness. Still, they are free to leave, costs of exit are low. In contrast, it is illegal for the employer to pay less than $5.15.
So some, but not all, of the benefit to workers who get more than they would in the merket, is offset by other workers who could do better in the market, but are lulled into false consciousness by the law, and settle for less.
I'm using a lot of words here, and havent gotten to my main point yet.
Minor point I've been trying to establish is that for some of the 2 million there is some small benefit, although the benefit is less than the burden of taxation.
Meanwhile of the 200 million, there might be 20 million who don't have jobs at all,
or who work under the table in the black market informal economy. It might be 20 million or 40 million; I'll use 20.
Some are independently wealthy and wouldn't want a $5/hr job. Others though,
because they are too old, too young, too sick, too crazy, too gangster, don't speak english, etc etc, want to work but are not worth more than $4/hr on the market.
Now part of this is the liberals might not want all of them working -
they should be in retirement homes, schools, hospitals, prisons, at government expense.
But in at least some cases, the person is willing and able to work, wants to work, someone wants to hire them - at $4/hr. Or $3, or $2.
I'm suggesting, without data, that there are 2 million such people. I've been one of them. So my theory is that for every worker who receives a small net benefit from minimum wage, another potential worker is shut out of the formal economy.
And the harm of having no job, or of having one's job be illegal, is greater than the benefit of the extra 15 cents (or whatever) to the minimum wage worker.
One example: I worked in the gift shop at a gay bar for $5/hr, a few shifts a week, under the table. The rest of the time I worked on my law practice. The gift store job was an excuse to hang out at the bar without pressure to buy drinks - I was there for the social life. Was I an exploited worker?
Another example: I am mildly autistic. While I by now have a doctorate, I had the kind of education that doesn't produce any useful job skills - I can't repair a car, build a house, write code, etc. I had some rough years, as a long haired wierd kid with a bad attitude and tendency to run 15 minutes late, of not being able to find a job at all in the city I grew up in. I would have been happy to start at less than minimum at a job with advancement potential. And I was white and spoke english and was healthy - lots of other people face bigger challenges. I eventually was able to get work as a dishwasher and janitor, worked my way up to working in warehouses, finished school, failed as a lawyer, might go back to working in warehouses.
But during my hard core unemployable years, minimum wage was a real obstacle to my getting hired on anywhere I could move up the ladder.
And I thought this was just me, but the article with the numbers made me think this is more common than we realize.
I think the average voter is emotionally attached to the minimum wage for irrational reasons, and would vote irrationally in an intiative.
There's more I could say about this method of setting public policy, but this rant has gone on long enough.
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