The Lies of Minimum Wage
PLEASE SHARE THIS WITH ANYONE UNDER 30 WHO IS SEEKING A JOB. THEY NEED TO SHOW UP AND SELL THEIR WORK ETHIC.
People love advocating for a higher minimum wage. The vast majority of people do not work on minimum wage jobs and do not understand labor markets. There is a petition in Nebraska to raise not only the minimum wage but to take over the payroll increases. If this ends up on the ballot, you should vote “no”.
Hikes in minimum wage disrupt the low end of the wage market and results in more automation and less employment. The economists are fairly clear on this but the general public presumes all employees have the same goal, which they do not. End result is low wage workers get screwed over regarding many other employee benefits. Raising the wage costs the employer and they will seek means to make cuts to pay for the higher wage.
Many low wage employers will try to pay just over the minimum wage because they do not want to deal with people who “apply for the sake of applying” but are not actively interested in work. Yet, the same employers have to deal with payroll tax of 15.3 between employee and employer and must keep labor costs under control.
There are many ways for an employer to address the higher labor cost. They will cut back hours of operation and lower pay raises and reduce benefits. Many employees expect percentage raises of 3 to 5 percent, but in the low wage market, such employees often receive “penny raises”. At $9.00 an hour (Nebraska’s current minimum), an employer may choose to give a nickel raise (5 cents) every six months with perfect attendance which is $9.10. By most business standards, an employee at $9.00 would expect to be paid $9.30 after a year but this is not how minimum wage works.
This expectation is misplaced. A low wage employer is not required to provide a generous or easy pay raise. Such an employer can have a policy stating, you receive a 5 cent raise after 3 months provided you have perfect attendance. Sounds great until you realize you miss a few days. After a year, you are being paid $9.10 instead of $9.20 and and under policies of other companies, you could have expected $9.30 to $9.45
There is another ugly problem with wage jobs. The employer controls what hours the employee receives. Two identical employees are working the exact same job, part time. After six months, Jeff is being paid $9.10 an hour and is working 53 hours a week, merely because he shows up every day on time. Overtime for him is $13.65. Mike was hired at the same time but is only paid $9.00 an hour as he missed a few days and has a 4 hour schedule on Friday from 6 to 10 pm. So on the latest paycheck Jeff is getting a $600 check while Mike is getting a $36 check. Mike would have been better off working for $5 an hour for 20 hours a week instead of doing the job he has. He would have earned $100 and gained far more work experience to promote up. You can hate this all you want but this is how the wage labor markets work.
As for Jeff, he keeps working over 32 hours a week and is eligible for employee benefits such as the 401k plan and health plans. Increasing the minimum wage could put him at risk of losing hours and losing these benefits. No one seems to understand this. Employers have a thousand ways to control cost. They can change incentives, bring in automation, cut hours, and adjust benefits and flat out push bad employees to quit. Employers can actually cut high paying jobs in favor of lower paying jobs. This can be done by mere attrition. Yet, the advocates of minimum wage never understand this as a consequence of raising the minimum wage.
If you want to empower employees to demand better wages and better benefits, the best option is to abolish minimum wage. No employee benefits from minimum wage. It is a big lie.