March 15

The Minimum Wage Experiment

It’s March 15, so we’ve had the March for a $15/hour Minimum Wage thing going on in Seattle today.

The discussion in the city seems to be divided between those who want to enact a $15/hour minimum RIGHT NOW and those who want to roll it in a little slower, or perhaps with some carveouts allowing for tips and benefits to count toward the minimum. There hasn’t been much discussion at all about NOT increasing the minimum wage – or even acknowledging that while it would be nice if entry level jobs paid more, the potential for all sorts of unforeseen consequences is very real when you suddenly raise the minimum wage by 60%.

The problem I have with the $15 Now campaign is that it doesn’t acknowledge this possibility. And maybe that’s to be expected from an activist movement; they’ve got to stake out an extreme, easy-to-understand position. But it worries me a lot.

I’ve been working since I was 14. My first few jobs paid minimum wage – $3.35 an hour. I was probably worth that as a teenage dishwasher or busboy, but just barely.

Adjusted for inflation, the minimum wage I made in the early ’80’s would be $7.87/hour in today’s dollars. That’s a little over half of what the $15 Now people say the minimum wage should be. And if someone had paid the 15 year-old me $6.39 an hour (that’s the inflation-adjusted equivalent of $15 in 1983), I would have thanked my lucky stars.

But the thing is, no one would have paid me that much. I wasn’t worth it – not remotely. And I have no reason to believe that today’s teenagers and first-time job holders are worth it either.

By “worth” I don’t mean to imply some normative moral judgment. It’s simply the reality that businesses are going to hire based on their needs, and they’re going to pay salaries based on market demand and contribution to the business. And if the government increases the minimum wage sharply upward, they’re going to need to extract that much more value out of those minimum wage jobs.

What does this look like? Many of the $15 Now people naively claim that it will simply mean less profits for the companies, or marginally higher prices. But that viewpoint fails to account for the reality that many businesses that hire a lot of minimum wage workers a) face relentless price competition and b) are highly protective of their margins. Those employers are far likelier to substitute some of that labor with automation, and significantly raise their hiring standards. The real-world impact of this will be a lot fewer jobs for teenagers and those with little-to-no experience.

And that’s a problem. The best thing for me about working restaurant jobs as a teenager wasn’t the money it made me, but the experience I gained. And not just the experience that enabled me to land better jobs later. The experience of working at tasks, and in conditions, that taught me surer than any other lesson that I needed to continue my education so I could do something else.

I worry that the drive to raise the minimum wage will end up making it a lot harder for a whole segment of people to get their foot in the labor market door in the first place, and have that chance to start moving forward.

* all calculations via the Bureau of Labor Statistics CPI Inflation Calculator

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