Benefiting Low-Wage Workers without Minimum Wage Laws
Strategies to help everyone
If it is a bad idea to raise the minimum wage, or even have a minimum wage law to begin with, where does this leave the low-wage worker?
We already examined the empirical evidence showing that minimum wage laws reduce employment among the groups the laws are intended to help. (If you missed it, check out my blog.)
We also looked at the negative impact on small business—that most important job-creation engine. (Check out this blog.)
Now we want to know what we can do to help low wage workers.
A job is better than no job
True. Some workers earning a minimum wage will find themselves better off with a law that increases their pay. However, millions others will be hurt. Some are harmed because their hours might be reduced. Worse, many others will not be able to find a job or lose their job. The nonpartisan Congressional Budget Office predicted this number will be 1.4 million people if the federal $15 minimum wage proposal becomes law.
If you cannot find a job or lose your job, you are not better off. This is especially true for workers starting out in the labor force. They learn things on the job that they cannot learn in a classroom or at home.
They learn the all-important soft skills required to function in the workplace, such as getting along with coworkers, meeting expectations, and showing up on time prepared for work.
Importantly, they also begin building their net worth. At a minimum, they do this by putting away for their future with contributions—matched by their employer—to Social Security and Medicare.
No minimum wage law does not mean no standard
The minimum wage is an arbitrary number with little meaningful relationship to the particulars of a specific job. The United States has nearly 6 million business firms with 7.9 million establishments in thousands of industries in over 3,000 counties, according to the Economic Census. Each has its own characteristics in terms of expectations, skills, and pay.
One of my first jobs was in a machine shop. I still recall how the employer misrepresented the minimum wage when he hired me. He tried passing it off as a pay level sanctioned by the federal government. I did not buy it and was offered higher pay. Later I learned others in the shop fell for his ruse—and were receiving just the minimum wage.
If we would eliminate the minimum wage law, then low-wage workers would look to other standards reflective of the job and industry.
Think of Kelley Blue Book that helps consumers know the value of a car. There are also companies—like PayScale—helping job seekers know what to expect in terms of pay. Moreover, the U.S. Bureau of Labor Statistics conducts 12 surveys on pay and benefits—including wage data for over 800 occupations by area—that can be used as guidance.
It would be better for workers to have knowledge about pay scales based on real factors than rely on arbitrary and artificial standards set by government law.
The Success Sequence provides an outline of how to reverse the cycle of poverty in our communities. GCO uses this as a framework for much of our work.
Career ladders and skill sets
The Georgia Center for Opportunity works with community groups helping job seekers link with employers. Setting career goals, understanding the skill requirements of various occupations, and having realistic expectations of pay are all important components of putting together a plan to help job seekers grow in their career and compensation.
These plans are what will help them the most if they are stuck in a minimum wage job. It gives them a plan of action on how to meet their goals. It also helps employers who often complain they can’t find good help with the skill sets they really need. This solution involves working with individuals on a one-on-one basis.
It also takes time—there is no magic button to push. However, in the end, it will be a win-win situation for both workers and employers. Raising the minimum wage is a win-lose situation—some people will win, but many others, including the overall economy, will lose.
Understanding the needs of employers in the labor market also requires us to do a better job at education in preparing our children for their future. As research has shown, giving parents more choices improves the quality of education—and will ultimately benefit our children and society.
We need to stop coming up with solutions that help some people at the expense of others. It makes little sense to damage the entrance ramp to employment in order to increase the pay for just some workers. Or for the government to have an inflation policy that hurts the poor the most, which I pointed out in this blog.
Instead, let’s focus our attention on solutions that help everyone. If you have comments, especially on what are the best solutions, we would love to hear from you. Be sure to post them in the comments.
*Erik Randolph is Director of Research at the Georgia Center for Opportunity. This blog reflects his opinion and not necessarily that of the Georgia Center for Opportunity.