Lower the Minimum Wage

I am a college student, and therefore likely to work some low-wage jobs over the next few years. Many Americans think that a higher minimum wage could benefit workers such as myself, but past precedent and straightforward logic show that raising the minimum wage actually hurts many low-wage workers. In order to truly open the doors of opportunity for young Americans, the American Congress and state legislatures should instead seriously consider decreasing the existing minimum wage.

Consider this: in a country without wage laws, employees can only be hired if both employer and employee freely agree on a wage to be paid. Employers are willing to hire more workers at low wages, whereas more workers are willing to be employed given high wages (not very surprising). Somewhere in the middle, there exists a sweet spot, or equilibrium wage, where the number of willing workers matches the number of employees wanted by an employer. Wages will gravitate toward this level in a free market, as businesses strive to attract talented workers without going broke from excessive labor costs.

Notice, however, what happens when the government imposes a minimum wage. If the minimum wage is above the equilibrium wage described above, there will be more people seeking work than employers are willing to hire. Unemployment will rise, with many people willing to work but prevented from working, simply because their skill set cannot justify a high wage. Simply put: if a person’s skills are worth $6 an hour in the unrestricted market and the minimum wage is $8 an hour, that person will likely go unemployed as companies weigh their costs and benefits.

Now, some workers certainly will benefit from an increased minimum wage. If a worker is deemed skilled enough by their company to keep their job, they will enjoy higher pay and less competition for their position. The negative trade-off, however, is the very real pain for those who lose their jobs.  Ironically, politicians often promote minimum wage laws in the name of helping the poor, when in reality the poor and uneducated suffer the most from unemployment caused by minimum wages. Skilled, educated workers generally come out as winners at the expense of the poor.

Many young people today simply do not have the skills to merit high wages. However, this does not mean that they should not be hired- they should simply be hired at a wage appropriate for their skill level. By decreasing the current minimum wage, American legislatures can provide more youths with opportunities for productive employment. A few years of job experience will likely prepare these youths to take on higher-paying jobs, but only when they have the real-world skills to compete for them.

Thus, to benefit young workers and give them the broadest range of economic opportunity, America needs to rethink its stance on minimum wages. There exists no “right” to any specific dollar amount of pay, but we must defend the real right of Americans to work using their own skills and talents, at any wages acceptable to both employer and employee.

The Protected Class (Part 1)

Some of my recent work for the Mackinac Center for Public Policy has been in regards to government employee compensation here in Michigan.  As I delved into the topic, I’ve found that Wendell Cox’s assessment is correct; government employees truly are a protected class.  Over the next few days I’ll be presenting my own case on this point, looking at both Michigan and National statistics. Some language will be pulled from a MCPP essay I helped write.

Today’s topic: Employment.

According to the BLS, Michigan’s private sector has shed 12.1 percent of its jobs since 2000. The number of jobs lost — 484,200 — is about the size of the total employment in Rhode Island. In fact there are nine states with whole private-sectors smaller than Michigan’s private-sector loss since the start of the decade.

Local government in Michigan on the other hand  only shed 6.1 percent of its workforce, while the state government and state enterprises like universities actually expanded their payrolls.

Nationally, similar trends have come to the surface.  The nation has grown its private ranks by 3.2 percent since 2000.  Not to be outdone, the government expanded by 8.2 percent over the same period.  This means that nationally, we have grown government employment over 2.5 times faster than the rest of the country’s workforce.

And these figures are just up to 2008.  What will 2009 tell with the increases to AmeriCorps and Obama’s mission to add oversight and regulation left and right?

We cannot continue to add to government ranks that do little to produce wealth, and do much to move around and waste it.  But not only are government employees wasting taxpayer money through bureaucracy, they are consuming more than their fair share of it in compensation. Stay tuned…

Part 2 ->

Adam Rule – MCPP Intern