Minimum wage hikes hurt low-skilled workers
Author: Mike Flynn
Publication Date: July 2006
Newspaper: Louisville Courier-Journal
Topics: Minimum Wage
If you give someone five dollars for a magazine costing $3.98, how much change should you receive? And if someone was unable to count out that amount, would you want them manning the cash register?
Or what if they were unable to fill out a job application; would you consider them for hire?
This is one of the most serious — and unmentioned — issues facing employers looking to fill entry-level positions in today’s job market. While activists and legislators abstractly discuss wage and price controls, business managers on the ground have to contend with practical matters of hiring and firing.
The question facing any employer is whether a prospective employee is worth the hire. Does the person in question possess the necessary skills and potential to contribute to the success of the business?
This question grows even more complicated for employers in the service and manufacturing industries, which supply the majority of entry-level positions. These positions provide many people with their first jobs, offering them the opportunity to develop the skills and experience to advance in their career.
Entry-level positions often represent the only employment opportunity for those with limited education or high school dropouts — at least initially. But to even get a foot in the door, basic skills such as reading, writing and simple arithmetic are crucial.
But more than half of all high school dropouts are functionally illiterate, unable to read basic instructions or fill out an application. And over 63 percent of those lacking a high school diploma are functionally innumerate, which is to say they can’t make change, if serving a patron or working a register.
Now, in response to the problem of helping low-wage employees provide for themselves and their families, federal lawmakers and labor activists are proposing minimum wage hikes. The Senate may soon vote on Senator Edward Kennedy’s, D-Mass., proposal to raise the federal minimum wage to $7.25 an hour, and Senate and House Democrats have vowed to pursue the issue through November. And with election season approaching, activists around the country are promoting ballot initiatives to raise the minimum wage in half a dozen states.
But the increased costs associated with a wage hike saddles employers with a dilemma. Wage hikes frequently force employers to cut jobs and scale back hours in order to maintain profits — and thus stay in business. So who are they most likely to consider a liability: a part-time college or high school student, or an illiterate employee who may in fact need the job more than anyone else?
Indeed, 60 years of economic research, including recent studies, has shown that low-wage, low-skilled employees are the most likely to lose their jobs after a mandated wage hike.
The making of public policy is a strange enterprise. Where else are means and ends so poorly harmonized? If a woman’s foot were broken, the response would not be to buy her a better brand of tennis shoe, but to see that she receives medical care.
If a man does not know how to drive, this does not mean that he needs a better car. It means he needs to take Driver’s Ed classes.
So when confronted with the problem of functionally illiterate and unskilled employees seeking to enter the job market, why do we assume that raising the minimum wage is a solution?