A Minimal Minimum Wage Hike, Ctd

You can catch up on the rowdy reader debate here, here, and here. An economics professor tries to set some facts straight:

First, economists – even with centuries of combined experience – do not have a consensus on the minimum wage. Opinions on employment effects range from “modest” to “none,” and that range reflects contradictory empirical findings. Second, the most important employment effects may show up not in outright job losses, but as low subsequent growth in low-skill jobs (which can add up over time). Third, your reader who claimed that minimum wage increases GDP is clearly not an economist. Income gains by low-income workers are offset by higher prices for consumers and lower returns for shareholders. That may be good, but it is cutting up the pie differently, not making it larger.

Meanwhile, responses have poured in about the case of Steve, Bob, Mike, and Mary:

Your businessman-reader’s reply perfectly describes the problem many young employees face: businesses unwilling to hire entry-level positions. What he fails to realize is that in order for Mary to exist in the future, somebody – either himself or his competitors – has to hire Bob, Steve, or Mike today. When Mary started out years ago, did she add $20 to her company’s bottom line? Of course not; nobody does!

If you see your employees as only an expense, and not as an investment, you get caught in that sort of thinking. Yes, as a short-term individual case, it makes sense for him to hire Mary, especially if his competition is spending the resources to train her. But Mary is in short supply. If every company is going after her and neglecting to invest in their current human resources to allow that kind of expertise to develop among younger employees, the industry as a whole is going to suffer. So, why not treat the employee as an investment? Because that’s long-term thinking, and long-term thinking is beyond the grasp of most 10-year-olds (and apparently at least a few businesspeople).

One of many more readers:

The businessman can’t know exactly how much profit an individual employee will bring to the bottom line.

Unless we’re talking about commission-only salespeople, it’s a guess. Ages ago, when I had a corporate job, I received a $25K raise on my annual salary when I completed my MBA. I didn’t even have to ask for it. You could argue that decision reduced the profits to my employer by $25K. Or maybe the potential costs of me leaving for a competitor were much greater, or it was less costly than searching for someone new. Whatever numbers they put to the possible scenarios were a guess on their part. I wasn’t suddenly smarter or better at producing profits on graduation day; senior management was playing the odds. So is your reader.

Another elaborates on that point:

The model assumes that not only that the financial planner knows exactly the incremental economic benefit that each unit of labor contributes, but furthermore, that he knows this before hiring them. If the former is true, he should stop being a financial planner, get a developer, and sell that software to every HR department in the country; the latter is obviously not possible.

Bob might not have any skills right now, but he may see inefficiencies in the way the financial planner runs his business, or he may know a bit of Visual Basic and be able to code some macros that save five man-hours of work a week, or he may be able to handle clients really well and give the financial planner uninterrupted periods of time to work that end up be two to three times more productive than slipping in 20 to 30 minutes of work in between calls. Or none of this might be the case. But to say that you know and try to pass it off as a “real-world example” does not pass the sniff test.


What seems to be missing from the argument of your reader who opposes a minimum wage for teenagers is a definition of profit. How does he calculate what an individual employee contributes to his company’s profits, and where do those profits ultimately go? To him? How do we know it’s not his compensation that’s too high? Maybe his company would do better if he took less money out or boosted productivity by paying higher wages. It never ceases to amaze me that labor is always considered a “cost,” but executives are paid enormous salaries and bonuses because they “add to a company’s value” – as if ordinary workers don’t.

Another shifts gears:

I’m surprised that none of your readers have circled back to the problem that inspired this whole thread. While some of your more business-savvy readers flail around, blame unions, and pretend that there is no reasonable limit to what a minimum wage should be, why don’t they consider this: a minimum wage should be enough for a full time worker to stay off of government food aid. For a single-earner in a family of four, that’s just shy of $12 an hour in most states. That’s not a great amount, and I’d rather see it higher for the sake of everyone’s dignity, but I did not pull that number out of thin air. I did a rough estimate based on the United States Census’s threshold numbers found here. The common number to use tends to be a family of four, which in 2012 was $23,492. If you assume a 40-hour week and 52 weeks a year, that would be $11.29/hr. Let’s even get a little bit luxurious and call it a 50-week year to get all of the federal holidays and one week “paid” vacation, you get $11.74. (Let’s say you live in Illinois where food aid is indexed at 130% of poverty. You would get $14.68.)

$11.74 might not be the minimum wage that one of your readers wants in order to stay as profitable as he wants to, but it is the absolute minimum you should pay someone if you call yourself human.


Well, it’s the perfect time of year for the Ebenezer Scrooges of the world to ask, “Are there no workhouses?” So, in that spirit, and in the spirit of your readers who insist that raising the minimum wage would kill job creation, here’s my proposal: Don’t raise the minimum wage. Instead, let’s lower it to 10 cents an hour. Then everyone could have jobs! Problem solved.

Meanwhile, the businessman offers his “final word” on the issue – and makes some decent points:

I’m a “greedy” businessman because I won’t hire any teens at a rate that is unprofitable for me. And yet, you are the bastion of “human decency – because you treat your interns like humans, and not simply economic units” – and yet, also don’t employ a single teenager.

Questions: Are your readers aware that your “interns” are highly educated adults in their mid- to late 20s, with degrees from Amherst, and graduate degrees from Columbia School of Journalism? Are your readers aware that your “interns” have a long, deep, meaningful background of employment with institutions such as the Guggenheim and the Jordan Times? Are your readers aware that your “interns” have graduated college five, six, seven years ago? Are your readers aware that these are not unskilled teens we are talking about?

And why don’t you employ any 17-, 18-, 19-, 20-, 21- or 22-year-olds? Because it is unprofitable for you to do so at the minimum wage. The teens you could hire and help gain some meaningful experience do not have any skills that are worthy of your start-up. They would would be a drain upon your limited resources.

You and I are the same.  We are professionals running our own business. We have limited resources. We must make smart decisions or we fail.

The Dish would have no problem hiring a qualified teenager, but the vast majority of teens are still full-time students, and our six-month internship is full time. And for the record, we have hired staff that don’t have a college degree. More generally, we don’t hire interns to increase subscriptions and thus profit, but more to decrease the work and stress of our incredibly dedicated staffers. One more reader joins the thread:

I run my own small business.  Whenever there is work that I’m not able to do myself – either because I don’t have the skill set required (e.g., accounting/tax preparation) or because I have too much work to do myself, I hire other people to do it. So the first question is, what is the work to do be done?  The second question is, who is capable of doing the work, and what hourly rate will I need to pay someone to accomplish the work successfully?

In my business, even the lowest-skilled tasks require some skill level.  If I hire someone to open and sort my mail, I want to make sure they’re not accidentally throwing away a payment from a client.  If I hire someone to input data, they need to do it accurately, or they’ll mess up my books.  I cannot imagine trusting even these basic tasks to someone who is able or willing to work for less than the minimum wage.

What specific tasks is this alleged “highly successful financial services company” trying to get accomplished?  I can’t think of any task that is so expendable to that type of business that you’d entrust it to someone making $3 an hour.

“Economics 101” means that you hire QUALIFIED people and pay them the market rate for their skill set — that is supply and demand.  It sounds like this guy is simply trying to escape Economics 101 by shifting adult, skilled work to underpaid teenagers (who, as other readers have noted, are already in a separate category for minimum wage purposes).  Maybe he should move his operations to Bangladesh.