Doing the Minimum
Audio Recording by George Hahn
During Tuesday night’s debate, Trump and Harris discussed the economy, but neither referenced the simplest available move to reduce poverty and inequality: raise the minimum wage.
On the campaign trail, they’ve both jumped on an idea to eliminate the federal income tax on tips. This is populist bullshit that would accomplish nothing. Workers who depend on tips comprise just 2.5% of the workforce, and most don’t make enough to pay income tax. Meanwhile, one can imagine private equity firms and real estate brokers finding law firms to restructure their carried interest fees and commissions as “tips.” BTW, nearly every change to the tax code over the past 40 years has transferred wealth from the young/middle-class to corporations and the überwealthy, who are enjoying their lowest tax burden since 1939 and paying single-digit tax rates.
The federal minimum wage is $7.25 an hour. Harris has said she supports raising it but hasn’t said by how much; Trump, who’s been stiffing employees and vendors his entire life, has flip-flopped on the issue.
Wage Warfare
There is an economic war between the old and rich and the young. And it’s been a slaughter. The federal minimum wage is Exhibit A. It was created by Congress in 1938 to serve as a floor for state minimum wages, which vary widely. A number of states have recently raised theirs. The federal minimum, though, hasn’t gone up since 2009; it’s not even been adjusted to keep pace with inflation or gains in productivity. Its buying power peaked in 1968.
A federal minimum wage adjusted for inflation and productivity would be about $25 an hour. The reason it hasn’t kept pace, and is instead 40% lower (inflation adjusted) than in 1970? A: Politicians from both parties believe their core constituency is corporations, and they’ve served them well, protecting the profit margins of companies whose business model is based on paying sub-poverty wages. In 2021, when Democrats controlled both houses of Congress, eight Democrats joined with the GOP to kill a measure to raise the minimum wage to $15. All this bitching/barking about tearing down the 756 U.S. billionaires, vs. lifting up the 34% of American households that make less than $50,000 (annual income if we raised minimum wage to $25/hour).
Another reason the minimum wage hasn’t kept pace is that it mostly affects young people. Young people are less likely to vote than seniors and have little representation or empathy from a Congress that’s become a cross between The Golden Girls and The Walking Dead — average age 62, vs. 38 for all Americans. Two-thirds of the people getting paid the minimum wage or less are 34 or younger, and nearly half are 24 or younger.
We have epidemics in the U.S. — depression, anxiety, high blood pressure, homelessness, obesity, and poverty — among young people, particularly men. (Though it’s worth noting here that the majority of people making the minimum wage in the U.S. are women.) The most powerful means of addressing these ills, and the “deaths of despair” that follow, is a good job at a fair wage that acknowledges the nobility of work. In addition, a good job creates incentives and illuminates a path to wealth creation and economic security.
We’re not talking about making busboys and home health aides millionaires, but creating an incentive structure that vaccinates young people from the virus that is the largest preventable cause of death in the U.S.: poverty. And less poverty has an added benefit: It would reduce the need for expensive and inefficient government programs.
Who loves sub-poverty minimum wages? A: The for-profit industrial prison/fast food/service/hospital/pharmaceutical sector. These corporations have figured out a way to clip a staggering commission from a social construct. It’s not unlike health care, which generates more private, corporate income from treating diseases vs. preventing them. To prevent the disease of poverty, we need to just get the money to people who need it. The most efficient food stamps/mental health/obesity/diabetes/child-poverty program is … money. We’ve traded dignity, at a lower cost, for corporate profits that weigh on society.
Latin for “I’d Pay You Less”
The most compelling argument against raising the minimum wage is that employers would either pass the higher costs on to consumers or cut jobs rather than raise salaries. There is no free lunch, but the downsides have been consistently exaggerated by business lobbyists. “Minimum wage” is Latin for “I’d pay you less if I could.” But we need to bury the myth that the middle class is a self-healing organism the market shapes organically. It isn’t. The greatest innovation in history, the U.S. middle class, requires a consistent investment that matches the rhetoric. Any CEO or politician who drones on about heroes, the middle class, and Jesus is usually underpaying their employees, cutting food stamps, and soliciting oral sex in airport bathrooms.
$15 Big Mac
There have been headlines lately about $15 Big Macs, and in California some fast food chains have closed since the minimum wage went up. They say this like it’s a bad thing. If we were to foot taxes to the externalities — which is what government is supposed to do — we’d have beef and gas at $20/pound and $10/gallon. Yes, fast food restaurants and many retail, hospital network, and prison system stocks would decline. And it would be worth it.
Some restaurant, hospitality, and retail companies would fail, but most would be able to pass on the costs to customers without damaging demand. Most empirical economic data shows raising the minimum wage is broadly good for the economy, because poor and middle-income people spend most/all their money, creating a robust multiplier effect.
UC Berkeley economist Michael Reich and University of Victoria economist Justin Wiltshire recently wrote, “Outside the theoretical world, economists have conducted hundreds of studies on the actual effects of minimum wage. They repeatedly find that increasing the minimum wage raises the pay of low-wage workers, without leading to even minor job losses. Prices increase by minimal amounts that are too small to deter anyone from buying a burger or taco.”
An April 2024 study by University of Michigan and Carnegie Mellon economists found much the same thing. Co-author Nirupama Rao said, “Our results show clearly that minimum wages do little harm to independent firms and even benefit some owners while meaningfully increasing both the earnings and employment of young and low-earning workers. Of course, these gains to workers and owners are financed by consumers, who appear fairly inelastic in their overall demand for the goods and services furnished by independent businesses affected by minimum wage policies.”
According to a 2021 study by the Congressional Budget Office, raising the federal minimum wage to $15 by 2025 would lift 900,000 people out of poverty. And a 2019 study by the Economic Policy Institute, a Washington think tank, estimated that raising the minimum wage to $15 could lead to an annual increase in consumer spending of $22 billion.
Disunion
There is constant, inescapable tension between labor and capital. For decades now, however, capital has been kicking the shit out of labor.
That’s why the federal government needs to take the lead on raising wages. Businesses won’t do it, and unions can’t. Unions are not only ineffective — their membership over the past 30 years has fallen by half — but they also help support the illusion that middle-class workers have robust representation and don’t need large-scale programs. They don’t and they do, respectively. There needs to be one union for all workers: The federal government.
The traditional union construct has outlived its usefulness. Union membership in the U.S. peaked at around 33% in the 1950s and stands at 10% today. The labor movement has been crippled since its inception by infighting and corruption. Shawn Fain seems like an honest man, especially in contrast to the past two UAW presidents … who are in prison.
Other unions are simply ineffective. For all the hype about unionizing Starbucks locations, the baristas’ union has yet to win a collective bargaining agreement or negotiate a national contract. Last year’s Hollywood writer’s strike was a disaster for the WGA, with its members taking a 100% pay cut for the five months they were on the picket line in exchange for modest concessions from the studios. And it was the catalyst for a downsizing that curbed production in Los Angeles 60%, year over year.
Social Capital Formation
Low-paying jobs, particularly first jobs, tend to be shitty. That is as it should be — almost everybody with a great job now started out doing something tedious and hard for not much money. How do you make a lot of money? A: By starting to make money … any money.
For young people, though, an early job is as much about socialization as it is about cash. Somebody working on the front lines in service or retail can’t help but learn a lot about themselves and the rest of humanity. Pro tip: The biggest tippers are people who’ve worked in service jobs and now have money.
You learn how to work on a team, how to deal with co-workers and managers and customers who can be jerks. You learn how to get people to buy something from you, which is the key skill in a capitalist economy (i.e., the U.S. and anywhere else you’d want to live). In short, you learn how to develop and deploy social capital and begin connecting work and talent with money, and money with a better life. It sounds obvious, but many never make the connection. They want success, but aren’t willing to sacrifice for it. Few things build a young person’s self-respect, sense of purpose, and willingness to buy into society more than their first paycheck.
When I Grow Up
I didn’t enjoy being a kid. Being an unremarkable boy with a single mom, little money, and no access to public transportation meant the Wonder Years in West L.A. were mundane. However, at the same time, shows like Dynasty, Dallas, The Love Boat, and Fantasy Island outlined my escape route — money. And the way you got money was … work. Note: It still is.
By 9 years old, I had a paper route and walked three dogs. I bought packs of Bubble Yum for 15¢ and sold individual pieces to classmates for a nickel. By senior year in high school, I graduated to box boy. I’d leave University High at noon to work in the mailroom at Southwestern University of Law and, by early evening, bomb to the Westwood Chart House where I was a barback. The summer before college, I shrink-wrapped software boxes for a firm run by Scientologists. They were nice. And strange.
In college I was a trainer at LA Fitness, an usher at the Avco Cinemas, and changed/cleaned beer taps in bars in downtown L.A. Walking into bars in Compton at 11 a.m. mid-week was an illuminating experience. By this point, I had access to the UCLA athlete’s job board. Every weekend, I’d put on white shorts, K-Swisses, and a white polo and head to the Mondrian, where I was a pool boy. Twice a week, for $30 in cash, I’d put on a suit and venture to a posh home in the Flats of Beverly Hills. I’d go upstairs where an elderly woman would be dressed to the nines, lying in bed. I’d scoop her up and carry her downstairs and into the back seat of a Rolls Royce. Her driver would transport us to Scandia (a fancy restaurant in L.A.) where I’d (again) carry my client into the restaurant and seat her at a table with six to eight friends/admirers. The woman in my arms was Lillian Hellman (ask your parents). I sold commemorative gold coins over the phone. I was a sperm donor — $40/shot. So I have somewhere between 2 and 2,000 kids. But that’s another post.
This kaleidoscope of work paid me enough, with $5,000 in student loans and Pell Grants, to get through UCLA with little/no help from anybody. My first job out of UCLA and business school enabled me and my girlfriend, who worked at Arthur Andersen, to buy a home in Potrero Hill in San Francisco for $285,000 at the age of 28. Imagine any young person being able (today) to get through college and buy a home in San Francisco with their own earnings.
The assault on the prosperity of the young is especially mendacious, as it’s taken place in concert with the greatest increase in national wealth registered in history. Be clear: This has been purposeful. Americans over the age of 70 are 72% wealthier than 40 years ago, and people under the age of 40 are 24% poorer. Money is the transfer of time and work. To give someone or something money is to love them. And America loved me, connecting my effort with prosperity. At an early age, I understood the assignment.
Our youth now are depressed, anxious, obese, and broke. It’s not globalization, network effects, or some other bullshit narrative fomented by the incumbents. It’s the wealth transfer, and, like I said, it’s been purposeful. And the most elegant, effective means of reversing this lack of care/regard/love for the young in America would be a massive increase in the minimum wage. It would be costly — and worth it.
Life is so rich,
P.S. Jessica Tarlov and I unpack the Harris/Trump debate on our newest podcast: Raging Moderates. Listen here on Apple or here on Spotify
P.P.S. Section is hosting an event on September 25 on Augmenting Human Creativity with AI, featuring SonyAI’s chief scientist. RSVP here — it’s free.
This theme is fed by many ramifications that aren’t easy to solve: minimum wage with its impact in the economy, lifestyle hopes of the “young”, social media’s influence (creating false-expectations), role of a government and retirement age (which should be optional…why stop working at 65 when you are functional and want to continue producing? If you want to retire, you (hopefully) have some savings structure that will let you live without needing and income), ease to start a company, human perpetuation, and human emotions.
One thing raising the minimum wage will certainly not do: convince the wealthy they deserve less money.
Some more likely outcomes include: hyperinflationary loop, outsourcing, increased illegal immigration and exploitation of illegal immigrants, further collapse of the middle class, replacement of unskilled labor with technology, and even fewer job opportunities for: young people, felons, women, minorities.
Abolish the minimum wage. It is no more and no less than a rallying point at which businesses of all sizes can collude to suppress wages. Remove the rallying point and make them actually compete! If a business can design a job role that is only worth $4/hour and there is a willing participant to fill that job, LET EM! Otherwise that job doesn’t exist and that mouth is fed through charity instead of hard work.
For all the rhetoric you feed me about what an angry young man I am because of, among numerous excuses, a severe lack of opportunity; you seem set on destroying those opportunities for future generations with shortsighted circle jerk content like this.
If you raise the minimum wage to $25/hour, what happens to the wage of the experienced employee already making $25/hour? Are they expected to remain content with their now-minimum wage? Or is it unfair that unskilled workers are now making the same wage they put years, possibly decades, into achieving?
What is the commensurate hike in their wage to retain the comparative quality of life they enjoyed?
If that skilled employee gets a hike from $25 to $40/hour, what happens to the highly specialized laborer that was making $40/hour before? Do they accept that their highly specialized labor is now only as valuable as the experienced employee?
What about the middle manager making $65k salary? Director at $110k? All these rungs of society expect to be paid more than those below them, for better for worse.
The ripple effect never ends.
Price controls never work, all they do is create grey markets. Minimum wage shouldn’t even exist. One the margin, changing minimum wage will have little impact on the system, but over time it creates markets for offshoring, elimination of jobs through automation, undocumented labor, etc. Which all sound pretty accurate.
The free market has always been the fairest determiner of price and no worker should settle for something someone calls ‘minimum wage.’
The argument that prices will increase if minimum wage is increased is so flawed. The last minimum wage increase on the Federal level was in 2009. Have prices remained the same since 2009? No. Prices rise even if we do nothing, so we might as well try to keep up with the greedy corporations.
Great article.
Scott, I generally enjoy your newsletter, even though we disagree on a lot of things, because it makes me think. However, your use of the ProPublica article about “the überwealthy, who are enjoying their lowest tax burden since 1939 and paying single-digit tax rates” is disingenuous. That article is not about income tax. It’s about a hypothetical wealth tax on unrealized gains. Just look at your favorite punching bags stats in that article. Musk reported $1.5B in income and paid $455M in taxes. Not the 3.27% tax rate the article reports because he had $13.9B in wealth growth.
Do better.
Mike Bolger
10:35 AM (1 hour ago)
to me
Remember when Galloway wrote that “Brand Harris” post where he said “The good news: The Biden economy has a lot to celebrate. Impressive job growth….The VP needs to come armed with receipts re: job creation and growth”
Then it turned out those job numbers were totally fake.
818,000 jobs that the Biden-Harris admin claims to have created do not exist.
It’s the largest downward revision in 15 years.
Fake.Fraudulent. Counterfeit numbers.
And then it gets even worse
Full-time jobs are DOWN 1.6 million over the last year and part-time jobs are up 1.8 million. All the net job growth is gig work.
Two-thirds of new reported jobs are now government and social welfare created positions. In other words, Washington is buying the jobs — the economy isn’t creating them.
Last May, 414,000 immigrants (legal and illegal) gained a job. Meanwhile, 663,000 native-born Americans LOST their job. Since pre-Covid, native born workers have actually LOST ~2 million jobs. All of the net job gains are immigrants.
This is how Professional Liars use the number game to con people.
ALL Startup Bros know How To Lie With Statistics so when you catch a Startup Bro & Numbers Guy using numbers to lie to you it means they think you’re just another sucker and have no respect for you.
“Two-thirds of new reported jobs are now government and social welfare created positions.” – Ummm, a job is a job. I’m not sure why people think government jobs don’t matter or carry less weight than a private sector job, but I utilize services daily that are the result of government jobs, and I am thankful for it.
Work is work, and anyone trying to determine what kind of work is “real” work and what kind is not, is likely someone suffering from some form of insecurity.
You are terribly ill-informed about jobs being ‘made up’.
The Bureau of Labor Statistics(BLS) has a fast and rough means of posting *estimates* of job growth/loss each month – because it’s published so close
the actual calendar time it measures, it’s based on a more limited set of businesses and agencies. Much later the BLS does gather information from a much larger set of businesses
and agencies, which is more accurate.
It is common knowledge, that the early jobs data from the BLS is ‘rough cut’, and not ‘final answer’. The early estimates are openly known to be this way. That differences occur, is not a surprise at all.
As a 73 year-old who grew up in poverty, I worked hard to get through state college debt-free. I spent six years in the military, which enabled me to buy my first house at 25 for $45,000 while earning $15,000 a year. After leaving the military, I spent 33 years in financial services and now run three small businesses. My net worth exceeds $50 million.
The leadership skills I acquired in the military played a crucial role in my business success. Baby boomers had unique opportunities if they were willing to work hard, and now it’s time for Boomers to contribute a bit more in taxes to ensure that our children and grandchildren have the same opportunities we did.
Trump’s first tax cut allowed the wealthy to buy luxury SUVs and planes almost for free through Section 179, and carried interest is another way that benefits the wealthy at the expense of younger generations. Scott is absolutely right on this issue!
The major factor Scott left out that is depressing the wages for young workers is illegal immigration. I doubt Scott has many illegal immigrants competing in Scott’s field as a professor. Instead, they fight for the same jobs that young men need to get on the first economic rung in life. Anyone who has studied economics know when you increase the supply without an increase in demand, the price goes down.
Can we agree that publicly traded companies like WallMart should pay livable wages with benefits to all workers to include part time workers and small “mom and pop” businesses don’t?
Can we agree that publicly traded companies like WallMart should pay livable wages with benefits to all workers to include part time workers and small “mom and pop” businesses don’t?
This is one of the most idiotic articles I’ve read in a long time.
As an employer this seems like an easy answer right? It is not. You raise minimum wage and there is a chain reaction, I have to raise my prices to cover the wages. So you have for example a packing plant with 4000 employees all wages go up, we raise prices so now the $1.19 can of beans is $1.49 to cover this.. how did this employee with a little more to spend benefit? You know who positively benefits in this equation? The government, they now tax a larger wage, they definitely get a raise but first hand post covid I do not think my employees are any better off at all and I did raise all wages and then in turn raise my rates )-: It’s a no win. How about a flat tax for everyone say 18% so rich, poor everyone 18% of their income instead of the higher amount they currently pay? Just a thought.
Loved it!
The top 1% of individual taxpayers account for 45.8% of individual federal income taxes paid and the bottom 50% account for 2.3%? Look it up. Your uberwealthy comment about their single digit tax rates doesn’t make sense.
“überwealthy, who are enjoying their lowest tax burden since 1939 and paying single-digit tax rates”.
Then why do the top 1% of individual taxpayers account for 45.8% of federal income taxes paid and the bottom 50% account for 2.3%? Look it up.
Everything rings true. Thank you again. As someone said earlier, if Harris gets elected please find a way to speak with her. You’re very persuasive. She needs to get this.
Echo the Australia example where minimum wages are sufficient to live on. And few people tip. The true cost of running a business is actually borne by the business rather than sloughed off to society. We’ve had to make tough choices about paying care workers and child care people more, but we all agree it’s necessary. The benefits in terms of equity, social cohesion, and allocating capital productively are significant. Of course companies try to reduce head count but our unemployment rate is 4%.
Been to a McDonalds recently in any state with a high minimum wage? What do you see? More kiosks than people working. Duh, Scott. Get out of your ivory tower and go actually see what happens, in the real world.
Please become an advisor to our new President Kamala Harris. I really understand and appreciate your messages. Keep them coming!
How about we require public schools to teach every student a marketable skill in high school. Get the unions to help. Then kids that can’t afford college, or are not ready intellectually could go straight to work upon graduation. Elections, plumbers, welders, medical techs, etc, etc. Instant money, self-esteem, confidence, etc. while reducing reliance on welfare programs. Win-win and easy to do. So simple.
Sorry, electricians.
Sorry, spellcheck got me on electricians.
Scott … I want to submit that a higher minimum wage is a necessary but not sufficient condition to work up the economic ladder. In addition, one needs some role models, logistical assistance in personal life and above all the secret sauce of an innate drive to use those wages and other assistance programs to get up that economic ladder. While all the jobs and hustle you did as a young man are commendable, you have mentioned elsewhere about having role models who showed you a better life. Where your drive comes from, you alone can answer. I have many anecdotes in my life from where this view is formed. The most personal one is the drive which my grandfather had in the 1920’s to move from his poverty stricken life in the backwaters of India to a big city and make his life. I wish I had conversations with him about that decision.
Sorry … That was meant to be a separate comment … Not a Reply
Galloway for President!
In Australia our minimum wage is over $20 per hour and surprise surprise businesses have survived very well. Productivity is high staff numbers are low but everyone can afford a meal or and a roof over their head. No desperate people doing desperate things to survive. Housing is expensive and usually only achievable over 30 years old, but still accessible eventually. Cannot agree more that this is the cleanest way to make a fast and efficient impact on both young lives and a stronger economy.
20 AUD = 13 USD
Still better than our $7 min wage but frankly no one pays $7.
The min wage needs slowly adjusted and pegged to inflation. It’s so ridiculous that our elected officials are all-in for corporations and billionaires over the people, including those 8 democrats. I’ll never understand people supporting GOP taking money from the people, passing to billionaires, and still getting elected.
Hi Scott. Many great ideas here, and your description of your jobs made me laugh out loud. But I wouldn’t pooh-pooh the taxation of billionaires – or more accurately that phenomenon we call “income inequality”, the creation of many, many wealthy people over the last few decades (and I include myself without being anywhere near the billionaire mark). This of course had a concomitant loss of the middle class. This tends to get discussed as a moral issue so relentlessly that I don’t see much discussion of its purely economic effects. Supply and demand matters – and perhaps demand has been hugely distorted by the transfer of wealth upwards. More rich people and fewer middle class means that a larger chunk of anything in limited supply is taken by those who don’t have to think much (or at all) about price. A larger chunk of productive capacity also is directed towards what the wealthy want. More super luxury housing, less just… housing. More people with 2nd, 3rd, 4th houses. Less for the rest, and therefore (supply and demand) higher prices even for that less. This isn’t (deliberate) class warfare, or even mostly a moral issue – it’s just… supply and demand. It’s perfectly rational to see one of government’s functions as smoothing this out a bit for the sake of capitalism itself.
So I wouldn’t dismiss the possibility a fairer tax system might help in addition to higher minimum income.
Keep ’em coming – always thought provoking!
I loved your description of jobs when you were a kid. In general, your jobs sounded similar to mine but much better, especially getting to go to dinner at Scandia. I grew up in Burbank and went to UCLA. I worked in a five and dime store for the minimum wage of $1.10 an hour, babysat for 25 cents an hour, sold magazine subscriptions and a bunch more odd jobs. I worked as a teller at the Westwood BofA branch and remember cashing checks from a sperm donation clinic. That gave me a laugh – maybe I met you.
Powerful Bullshit Exciser! Grazie, Scott!
The federal minimum wage is not even a factor in most areas since there is a higher state minimum wage or the effective wages paid are over the minimum due to demand for labor. In cases where the wage is not higher, raising the wage by law will likely kill a number of jobs.
My experience growing up was similar to yours. Jobs like a paper boy would not have been subject to the minimum wage and my job as a dishwasher / cook would likely have been priced out of the market with much higher minimum wages. But those jobs provide great life experiences to young kids who are not working trying to support a family – those jobs were not intended to support an adult lifestyle. So unless you carve out some sort of age-based exception to the minimum wage, you will just price youth out of the labor market and they will never gain the requisite experiences.
On an unrelated note, I think that your grade school bubble yum hustle (the equivalent of guys selling single cigarettes on the street) might run afoul of the proposed Harris “price gouging” laws!
We are of very similar age. I had a large number and variety of teen jobs when minimum wage in the 1980’s was $3.35/hr. Generally all my friends worked summers, and 30-50% did as well during the school year. A too high of a minimum wage would shut down many of these early job experiences and already has here in CA where we are running “the experiment” that higher minimum wages don’t lead to job loses. Of course, nobody is measuring how many 16 year olds wouldn’t even be offered a job in the first place at $16+ today. Result: Your highly educated 22 year old college grads with no relevant work experience and unable to function in a professional environment and meet responsibilities.
Bullseye. My first job in my field at 16 earned me lunch. That’s it. That launched my career and I eventually became wealthy. I am not alone. Minimum wage is not only liberty destroying but eliminates starter positions for those where experience is worth more than the pay. Interfering with supply and demand misallocates capital lowering aggregate welfare- ECO 101.
When I read something to the effect of needing the government to . . . I wince. As pointed out, the government has been populated by representatives/senators who are looking out for only the interests of business/capital. Having that institution take on the interest of labor — labor OVER the interests of capital — means either having labor use their numbers to apply more pressure on legislators than capital’s cash can (US history laughs in the face of that premise.) or voters finally voting in their interests to place legislators in seats who will work for labor interests. Labor/workers selfishly looking out for their won interests (the way the wealthy do) seems so intuitive — but so far from the reality we live in now.
HOW do we get a nation (not just its youth) to mobilize to reform its representation? HOW do we create a national collective bargaining unit?
Sorry, it’s called CAPITALism for a reason. There is no more efficient socioeconomic system known to man- because it efficiently allocates capital. Less waste = more aggregate welfare. The USA is a leader in technology because of this- and the rest of the world benefits from the advancements. American’s largely to do not want to replicate the European regulatory state and its accompanying stagnation. More government frequently results in lower aggregate output because government acts as a drag on innovation and productivity because workers serve their administrator instead of their customer.
Looks to me like the unemployment rate has been flat in CA since the new minimum wage law went into effect. With apologies to Josh and his daughter’s experience, there are ‘now hiring’ signs at most supermarkets and fast-food restaurants within 2 miles of my house in the L.A. suburbs.
Separate topic completely: I want to point out that this is not a true statement. Scott, you more than anyone should recognize the importance of getting your facts straight.
“Shawn Fain seems like an honest man, especially in contrast to the past two UAW presidents … who are in prison. ”
Ray Curry, who appears to have been investigated for receiving _football tickets_ was cleared. I don’t know anything about the guy, I’m not in the UAW. My point is that you don’t need to throw around statements like ‘the last two guys are in prison’ to make your case. Especially if it’s not true.
Yes, yes and yes!
I’m young. And your idea of saving my generation with a minimum wage isn’t going to fix our problems. I have the game plan down at the bottom.
Most people my age wouldn’t win with a $20 an hour paycheck. It’s not the pay. It’s their mind.
We need people to look up to and ideals to work towards.
The Internet fixes a lot of that. We now can find men that have the life we want and figure out how to get there. (For free)
This is also why Trump needs to win. It’s a morale boost to the culture and a man back in charge. Yes he’s brash. Yes, he’s proud.
Good, now we know he pandering to himself and his family and not to some unknown sponsor.
I subscribed to your newsletter because you had a great email to graduates in 2021. You said “But playing the victim decreases your capacity”.
Keep teaching meritocracies and capitalism. Choose your side wisely.
I don’t think increasing the minimum is the best way to fight poverty. Far from it. The best way to fight poverty is providing someone with an education. An educated person has the ability to figure out how to make themselves valuable. That ability is the difference maker. While somewhat helpful, a higher minimum wage is not a difference maker. Not even close to a difference maker.
I don’t think it’s about education, there are plenty of educated people who are barely holding on. It’s about skill. Skills are what employers pay for, education isn’t going to put dinner on the table. Being able to perform at a skill that makes an employer money..
Part 3:
Economics 101: Minimum wage has a cost. What should be debated is if the cost is worth it. It’s not. All price fixing is bad as it misallocates resources. In this case, it means less jobs, higher prices (more inflation) and or lost business to competitors that don’t have such restraints (we live in a multi-national world).
Part 2:
We live in a knowledge based economy where access to knowledge is both free and virtually limitless. The right knowledge and skills are enabling. Today, a lower class citizen with an Internet connection has access to more information than the president of the U.S. did 20 years ago.
Looking to the future, those that apply themselves have a better chance of living the American Dream than at any time in history. The fact that there is such extreme income potential is sign of extreme opportunity for those that work hard and learn the right skills. In other words, it’s a good sign.
And lastly, these minimum wage jobs are starter jobs for people living with their families. Your not supposed to be an adult with a family earning minimum wage. And most statistics don’t take into account those earning minimum wage plus tips, or students, etc. When you remove those people you are not left with a very large group. And if you are one of those people than you likely weren’t paying attention or applying yourselves in your formative years. Personal responsibility matters. We don’t want a nation of people “entitled”, living off those that did the hard work.
It’s good to see that you realize there’s no “free lunch”. It’s also nice that you care about those less fortunate. And that’s where the good stuff ends.
Part 1 of 2.
There is a trade off between jobs and wage. The higher the price the less demand. Just like the price of most goods, we purchase less when the price is raised or more when its lowered. Therefore, one must be cognizant of the “cost” of a minimum wage or the cost of raising it.
Taking this to its logical extreme why not make minimum wage $100 an hour? Everybody who had a job would be able to support a family except almost no one would be employed.
Raising the minimum wage also changes the economic dynamics of automation (cost/ benefit analysis). In other words, processes previously accomplished through labor now can be done more efficiently through automation. Sadly, this leads to even higher unemployment of the very people that the minimum wage laws were intended to help. Destroying access to starter jobs is akin to removing the lower rungs of a ladder making it that much more difficult to begin the climb to a better life…
Jeffrey,
You have created a false dichotomy: a trade between jobs and wage. Instead I would argue the true tradeoff is between profit and investment in human capital (wages and jobs). Corporations once had to affirm a public good to exist; now their existence is perpetuated on sociopathic profit through exploitation of human capitol. It is that obscene profit motivation and tax code that results in doubling down of that profit, that has turned corporations into strip miners of human resources. it’s time to eat the rich instead of feeding them all we have to offer.
If you look through the long lens of history since the advent of capitalism these are the best of times and it’s not even close. The middle class has better access to the good life than the rich did 100 years ago and they live longer too. The trade off has always been between jobs and wages. Who buys more when the price is increased? Do people purchase less when the price is lowered? This isn’t rocket science.
Businesses succeed by pleasing their customers, not exploiting them. Value is derived by the consumer, not by another’s arbitrary opinion.
Marxism is dead and socialism is stagnating. And the beat goes on.
My first thought on the scramble to pander to tipped workers was the same: this would just end up a scam for well-paid service sector employees to avoids taxes.
All of the analysis is spot on. We need two legislative items for minimum wage. Item 1: increase the minimum wage by $1.25 per hour every year for 10 years. This gives business the necessary time to adjust. Predictability is important. They are in competitive industries, and need to adapt as they see the market shift. Big sudden changes have some really bad economic consequences in transition. Item 2: You did not mention this, but we also need to index the minimum wage to inflation using the same formula used to index tax brackets. Take it out of the hands of the politicians on a term-by-term basis. They no longer have to deal with their wealthy constituents, because it happens the same way the wealthy avoid bracket creep. Not only that, why is it that poor people do not get inflation adjustments while almost all other government-related folks get inflation adjustments? Tax brackets, social security, military pay, etc.
Nice piece. I’ll probably assign it to some students to analyze.
I agree that minimum wage nationwide should go up to adjust four all intervening inflation. Will it cost us more for our take out meals and more? Yes. That’s fine.
Second, you should create a method for your readers to easily write to their congressional representatives demanding they update federal minimum wage
Third, yours is a story that should be taught. More people can achieve levels of success you achieved by schooling & work hard & “Move On Up”.
I bagged groceries, delivered newspapers, cooked and delivered chicken takeout, pumped gas, repaired transmissions, drove school buses, was jr. chemist at aluminum anodizing plant, went to college, law schools (2 law degrees) and when I made good, I give back. Taught at Boys and Girls Club, sat on board of another Boys and Girls Club, raised money for wounded veterans to give them iBOTs & Track Chairs, raised money to send kids who lost a parent serving in military post 9/11 to weekend retreats, raised $ to rebuild medical devices and sent them to 3rd world countries. I can never repay my good fortune, but I also worked every job I could get, worked hard, and studied hard to make it. More young people need to know that to succeed they have to work. And it is way easier to become a teacher, firefighter, nurse, doctor, scientist, or lawyer than it is to get the crap beat out of you to become a pro football player.
How much does the DNC/DCP pay you?
Interesting.. few are going to live, or should reasonable expect to live on minimum wage. A much better alternative would be to bring back shop classes to high schools (and junior colleges). Electricians, plumbers, contractors, HVAC repair and install, factory technicians. No candidate mentioned this, or are even aware of it being a much better solution. Minimum wage jobs are a stepping stone. I do not like mandates, they don’t generally work (often counter outcomes). However, the inflation of the last few years are a good argument to raise. Would stairstep carefully though, not all at once. Small businesses and consumers will be somewhat impacted.
Hi Bill,
A lot of the things you mentioned already happen. Twenty states now offer free community college. At least five offer free technical college. I teach in a university, but I tell my students, the shortest path to owning your own business is often technical college. If HVAC companies are mostly small, then a large percent of HVAC workers own businesses. Even before this recent inflation cycles, minimum wage had been devalued dramatically by years of inflation.
Scott,
I think your personal journey reflects the benefit of accessible, entry level jobs for young people that gave you a chance to get started, while also paying you low enough to motivate you to increase your value to the market to deserve being paid more.
Having a 16 year old in California at the moment who is looking for her first job, having minimum wage so high has blocked 90%+ of the jobs you and I had access to when we were her age.
Small businesses aren’t hiring young people that have zero background because the time it would take to get any value out of them is longer than the young person would stick around before they leveled up to something better.
The distribution of minimum wage should be closer to 80% for people under 25, but that’s not possible now with increasing minimum wage requirements.
Unfortunately, schools are leaving those behind that can’t go to college and Mike Rowe makes a great case for reintroducing the trades for those students that aren’t built for higher Ed. That would catapult so many well beyond minimum wage by getting them a valuable skillset from the start.
Obviously, we won’t see eye to eye as I think the goal of minimum wage is to help identify the entry level jobs by, while you think it should provide a livable wage for anyone that shows up to do them.
Happy to continue the conversation if it’s useful as I’m game to expand my perspective on this topic.
Bravo. Common cents isn’t very common.
I think there’s a difference between what we all used to call entry-level jobs and what is now the low wage job market.
I’m the same age as Scott and when we all grew up it was a rite of passage for teens and early 20s to make their entry into the job market at fast food joints, ice cream parlors, grocery stores, retail and other part time crap wage professions. It taught us that businesses would be pay money for us to show up on time and get tasks done. We realized fairly early that bosses come in a range of flavors from great to awful. We also realized that some tasks pay better than others and if you want more ducats, you need to up your skills to become more valuable.
Those entry level jobs from 40 years ago are now filled by adults who have limited marketplace skills. Few teens and college kids fill those positions, they rely on their parents for support or refuse to work for the low wages. So, we have adults trying to make a living on wages and schedules designed for young people who aren’t supporting themselves.
People with advanced level skills can make a comfortable living, but those who don’t fall further and further behind. Eventually, the peasants revolt and out come the guillotines. Increasing the minimum wage so that more low skill workers can support themselves is just smart business and smart politically.
Scott: well done…if COLAs are going up then minimum wage should go up. Certain sectors have benefited by quite nicely paying their workers – well, crap. $7 X 2000 work hours a year = $14000 – less taxes and contributions to Social Security and FICA. Maybe 10%. $12.6K? Seriously? And don’t start with this regional nonsense…anyone who lives in a less expensive area benefits…so adjust wages to reflect this idea? Crazy and waste of time. $20 and hour X 2000 hours = $40,000. Much better. And frankly all the folks who line up in the am for a McMuffin or Starbucks will keep on keeping on.
Neither candidate answered even one question. Everyone knows that whatever the winner’s “policies” there is no guarantee that anything will change. IF there were 10 questions that Trump & Harris had to answer LIVE in writing we would see how our system isn’t working. So one could be: “How much will you raise the minimum wage: $5.00; $8.00 or ??? ” Ture or False: “Higher food prices will help defeat obesity. The CDC says we are 70% too big. True ____ False____” “The Defense budget of almso ta $trillion is too high. Wha tpercentage will you cut: ___10%; ___ 15%; ____25%
You make great points, but equating the positions of Democrats and Republicans on minimum wage is wrong. Democrats have supported a $15 per hour minimum wage across the board, whereas Republicans have not consistently.
Perhaps a more reasonable and fair approach would be to make a national minimum wage that is indexed to a regional cost of living – regional perhaps being county by county or even city by city. Surely it’s not fair to offer a minimum wage earner the same wage in Bakersfield/San Jose; Manhattan/Rochester; or Seattle/Yakima.
I would like to see 1% of the wealth of the top 1% by wealth people (the rich) taxed and distributed to the lowest 1% by wealth people (the poor). And most other taxes streamlined or eliminated. And let the market do the work. And over time perhaps that goes to 2% of the top 2% transferred to the bottom 2%. Until we find an equilibrium that works.
Which is also to say, I’d rather not see any minimum wage at all.
Scott, thank you. I fully agree. One question though, is how do you adopt a national minimum wage when there are large differences in cost of living across regions ( NYC versus the South) and different employment sources (finance in NYC and farming/ight manufacturing in the midwest)? How could you do a $30 minimum in NYC and a $20 in the south/midwest?
I like the concept of indexing minimum wage to a regional cost of living. This highlights an important acknowledgment that geographic economic differences significantly affect both workers and businesses. By adapting wages to local economic conditions, policymakers can ensure a more fair and sustainable approach to compensation for minimum wage workers, just as many companies do today for higher-paid employees. Might be worth a shot.