1-29-14 – Legislators call for 44% to 72% increase in minimum wage

First, thanks to Dave Gram of the AP for asking my opinions regarding the some legislators’ call for a “bill of economic rights,” including a proposed increase in the minimum wage. We had a good conversation on the topic, not all of which made it into the article.

In regard to increasing the minimum wage, Dave quoted me as saying, “They’re going to increase unemployment if they raise the minimum wage.” Accurate enough, but he then moved on to point out, “But the data on that question appear mixed.”

A fuller explanation of my comment might be helpful.

Looking strictly at the numbers, and recognizing that there are myriad forces at work on unemployment, Gram’s article points out that raising the minimum wage in the past has yielded mixed results. In 2007, Vermont raised the minimum wage from $7.25 to $7.58 – a 4.5% increase. Unemployment increased slightly. However, in 2004, Vermont raised the minimum wage from $6.25 to $6.75 – an 8% increase. Unemployment went slightly down. And this, Gram says, was the largest increase in the minimum wage in state history.

However, the minimum wage increase being discussed in this “bill of economic rights” would mean moving from $8.73 to $12.58 or even $15.00 per hour. Those are increases of 44% and 72% respectively. It is not hyperbolic to describe these as massive increases. They are talking about an increase 550% to 900% larger than the largest increase in state history. This will have an impact on employment.

To put this kind of increase in perspective, it would be like the price of gasoline going from $3.50 per gallon to $5.00 or $6.00 per gallon overnight. Imagine what that would do to family budgets. Imagine what it would do to the economy. An 8% increase in the price of gasoline would mean a jump from $3.50 to $3.78. Painful and undesirable for sure, but not ridiculous.

It is also important to recognize that those most harmed by minimum wage increases are youth. Roughly half of all minimum wage earners are teenagers. As our governor pointed out at length, we have a drug addiction problem in Vermont. Anything that creates barriers to getting teenagers off the streets and involved in productive, self-affirming activities is not a good idea. The best social program, after all, is a job. And, the real minimum wage is and always will be $0.00.

– Rob Roper, president of the Ethan Allen Institute.

 

{ 3 comments… read them below or add one }

Mark Shepard January 31, 2014 at 3:29 pm

For low-skill jobs the impact of forcing wages up is one of the following: higher cost for consumers, loss of products or services in that region, or eliminating jobs and those still employed working harder and more efficient to make the equation still work … or some mix of the above.

For high-skill jobs, where my experience as a business owner is there is another effect as well, which is a much more expensive path for people to get these type of jobs.

When I had my business in Vermont I trained a few young people. For months I lost money on the employee as he was learning the skills needed and I had no guarantee he would stay with me once skilled and truly earning much more than minimum wage. Increasing the minimum initial costs, which raising the minimum wage certainly does, makes it gets tougher and tougher to make a training period work. It is a risk that is very hard to take. This is the situation for small businesses that require skilled workers and since most job creation tends to be in the small business sector, it would be wise to think about that if we want to grow jobs that can in the end support a family.

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Mark Shepard January 31, 2014 at 4:34 pm

The real question for the left is what is their real goal. It very well may not be better jobs. Clearly they appreciate opportunities to increase government and a reduction of job opportunities does that as well as making on-the-job training (apprenticeships) impractical for businesses. The later creates two ways to increase government as people move into a more institutional student roll.

First there is a greater need money to pay for college, thus a means to campaign on a way government can solve a problem. Second it puts more money in the education sector, which in general is a left-oriented sector and many of it a direct government entity. And of course this gives a greater opportunity to push their socialistic ideas on people in the non-real world setting of academia, where ideas are protected from conflicting with reality.

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Mark Donka February 1, 2014 at 2:16 am

I have talked to small business owners. Many of them hire High school age teenagers for summer and after school jobs. As most have said these are unskilled workers that as Mr.Shepard said need to be trained before they are productive workers. Now what happens to the employee making 10,12,14 per hours? Their pay needs to go up as they are already trained and productive. And it just continues to snowball. Now since the pay has gone up, cost for the service or product goes up, who is going pay $10.00 for a Big Mac. So as the prices go up they are back in the same situation prior to raising the minimum wage. There needs to be entry level jobs where you learn to be a good employee and if you apply yourself you can earn a raise what a simple concept.

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