Don’t Raise the Minimum Wage

The editors at Bloomberg View have called for an increase in the minimum wage.  Last week James Galbraith  repeated his proposal to raise the minimum wage to $12 per hour.  A large increase in the federally mandated wage would be devastating to less skilled and inexperienced workers.  Galbraith and the editors at Bloomberg View would like to see higher wages and incomes for workers at the bottom of the income distribution.  Merely requiring less educated and inexperienced workers to be more expensive makes a bad situation worse.  These workers would benefit instead from education and training that would make them more valuable to employers.

The nearly 40% increase in the minimum wage between 2007 and 2009, combined with the deep recession of 2008-2009, destroyed many jobs for younger workers.  The following chart compares the change in the percentage of the population that is employed, by age group, before and after the recession and minimum wage increases of 2007-2009.  Teen age workers had the biggest decline in employment relative to population, followed by workers age 20 to 24.  Fewer workers age 25 and above are directly impacted by the federal minimum wage of $7.25 per hour, and these workers were impacted less by the recession.

Galbraith’s proposal to raise the minimum wage to $12, or Senator Tom Harkin’s (D-Iowa), proposal to raise the federal minimum wage to $9.80 per hour by 2014, will make it much more difficult for new labor force entrants to find jobs.

Galbraith’s CNN op-ed, as well as his article in Foreign Policy, credits Ron Unz  of the American Conservative with the proposal for a $12 minimum wage.  Unz supports a policy that would reduce demand for immigrant labor, slow immigration from Mexico and Central America, and benefit conservative political candidates.  This is a cynical reason for supporting a federal mandate that will destroy jobs for the most economically vulnerable workers.  It mirrors the arguments in support of a federal minimum wage in the 1930’s made by Senators from higher wage Northern states.  Ron Unz knows that a $12 minimum wage will reduce the employment of Latinos just as Senators from New England knew that the FLSA would reduce employment in Southern factories.

It is understandable that politicians might support a minimum wage that reduces demand for less skilled workers but benefits their constituents and supporters.  It is more puzzling that Bloomberg View and economist James Galbraith support a policy that destroys job opportunities for workers still suffering from the 2008-2009 recession.

Comments

  1. WingYan Li says:

    Undeniably, raising the minimum wages would destroy job opportunities for workers who are unskilled and inexperienced, but the fact that workers could hardly live with the minimum wage could not be denied too. Increasing the minimum wages is definitely necessary, a living wage is needed to provide basic needs for the workers. And at the same time when increasing minimum wage, the government should create more job opportunities that do not require skills and experiences. For instance, the government could sponsor different types of companies for providing entry level jobs such as trainees and internships in the market. On the other hand, the government could partner with companies to offer some training program for current workers so as to enhance their competitiveness. The government plays an important roll in the economy while raising the minimum wage. Raising the minimum wage is definitely necessary in helping the working poor to get out off the poverty line.

    • Wing Yan: yea, I agreed with what you’ve said that raising the minimun wages would minimize the job opportunities as that’s what employer can do when wages raised in order to reduce cost. But at the same time we all know that all the things increased cost so we need more money in order to maintain our live. Such a dilemma!!!!

    • A minimum wage should always be set by the market, ideally reaching equilibrium price, where the supply and demand intersect. As described by Wing Yan, minimum wage behaves as a classical price floor on labor that it may increase unemployment rate. Theoretically , if the minimum wages is set above the equilibrium price, more labor will be willing to be provided by workers than will be demanded by employers, creating a surplus of labor, i.e., unemployment. However, there are some industries will not be affected by the minimum wage law since inflation offset the pay raise. So if the the government increase the minimum wage together with carrying out some new policies as mentioned by Wing Yan, it should be a great benefit to the market economy.

    • WingYan Li: I do agree with your proposal about having companies to enhance their workers or to offer training to inexperienced or unskillful workers. However, whether to raise the minimum wage or not, a concern for me with Galbraith’s proposal is his argument of reducing the rate of immigrant labor. With that being said, he is not quite concerned with the lower class either who are not educated well enough in the workforce; the lower class is meant to be sacrificed. If we see this in a bigger picture, this can be a huge issue and a massive blow to America’s future. Look at it this way, the highest population in this country is the immigrants. What makes this country to continue moving forward even during the recession is mostly because of numerous workers who are willing to earn the minimum wage and willing to spend hours in their jobs. If Galbraith is sticking to his proposal, can you imagine what would happen later on? Of course, more Americans are going to get to where they want to be, if they are skilled enough. However, without millions of immigrants and the lower class, America might not be going to the best direction.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: