It's an election year, and bad economic policy is popular once again. One of the worst ideas bandied about is that raising the minimum wage is good for low-wage workers. On May 25, 2007, President Bush signed a bill into law that increased the federal minimum wage in three steps: to $5.85 per hour effective July 24, 2007; to $6.55 per hour effective July 24, 2008; and to $7.25 per hour effective July 24, 2009. Local politicians are scrambling to increase the Kansas state minimum wage to meet or exceed the federal minimum, and that's a really bad idea.
Three things happen when the minimum wage rises, and two of them are bad. Low-wage workers who keep their jobs benefit from rising incomes following an increase in the minimum wage. That's good, obviously. Nobody would begrudge rising incomes among kids and the working poor. Unfortunately, effects from rising minimum wages don't end there. That's only the beginning. Low-wage workers who get laid off because of rising minimum wage requirements suffer real economic harm. Also injured are potential workers who never get hired in the first place because of rising minimum wages. High minimum wages don't help when nobody's hiring.
In high school, the first paycheck I received was for a job as an usher at a movie theater. Then, a local gas station offered higher pay as a "gas pump jockey" to pump the gas, wash the windshield and check the oil. Later, I moved on to carrying out groceries at the local supermarket. Along with millions of other teenagers, those low-wage jobs taught me the value of getting to work on time, how to work with others and about paying taxes. All of those low-wage jobs have something else in common; they no longer exist.
Low-wage jobs to pump gas, carry out groceries, wash cars, act as golf caddies, and perform a host of other services have simply disappeared. Skinflint employers and greedy corporations did not kill them; rising minimum wages and cheapskate consumers like you and me ended a host of low-wage job opportunities. An inconvenient truth about rising minimum wages is that they eliminate low-wage jobs. When minimum wages rise above the going rate for unskilled labor, self-serve labor provided by cost-conscious consumers eliminates many low-wage employment opportunities.
Here in Lawrence, kids can now get jobs at local fast-food restaurants for roughly $6 per hour to start, and $6.50 per hour after three months or so. That makes the most recent increase in the minimum wage to $5.85 per hour irrelevant, at least here in Lawrence. In rural Kansas with fewer job opportunities for kids, $5.85 is above the going rate, and cutbacks in low-wage job opportunities are resulting. The biggest harm from increasing minimum wages is going to be felt after the election with scheduled increases to $6.55 per hour in July 24, 2008, and to $7.25 per hour July 24, 2009. Preparations have already begun for dealing with these scheduled increases.
Neither you nor I are willing to pay an extra 5 or 10 cents per gallon to have a kid pump the gas, wash the windshield, and check the oil. Instead, we choose to fill our own tank at the gas station; we also wash the windshield or leave it dirty. It would be nice to have someone bag the groceries and take them out to the car, but we're not willing to pay for help us at the grocery store. We also love "free refills" on soda at fast-food restaurants while employers minimize labor costs by not having to fill drink orders.
In Lawrence, next time you visit Chipotle or Pepperjax Grill, notice how those restaurants have designed their businesses to minimize the need for waitresses, busboys, and dishwashers - all once coveted jobs for low-wage workers. Those jobs are gone, and they are not coming back. As the minimum wage rises, expect longer lines and anticipate becoming familiar with self-service checkouts at the grocery store.
It's an election year, and politicians want voters to believe that they can help low-wage workers by simply increasing the minimum wage. In fact, the only way to increase wages is to make workers more valuable to their employers. That means workers must ultimately become more valuable to consumers. Rather than endlessly wrangle over harmful minimum wage legislation, why not devote that energy to finding ways to help make low-wage workers more valuable? Better funding for basic education and worker training are proven ways of making workers more productive, but that takes time and tax dollars.
Neither is popular in an election year. Enlightened economic policy focuses on ways to help workers earn maximum wages, not minimum wages. Unfortunately, this is an election year, and it remains popular to ignore a simple inconvenient truth about increasing the minimum wage. Rising minimum wages eliminate lots of low-wage job opportunities. That's bad for kids and the working poor.