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A Minor Point About Minimum Wage

Posted by on May 6, 2010

[This post was originally written for my employer’s blog, Show-Me Daily.]

The first job I ever got paid for was probably mowing lawns in the ’90s when I was a teen. Earning $10 per lawn sometimes didn’t seem worth it while pushing the mower in the sweltering heat — but I had a friend named Jonathon who, with a ton of initiative and some help from his dad, started a small operation where he mowed several lawns every weekend all summer long to begin saving for college.

The first job for which I ever received a paycheck was developing photos at Walgreens, right around the time I turned 18. I made $6 per hour, and developed lots of photos and stocked lots of sodas and milk during my time there. I never felt entitled to any more money than the people I worked for back then felt inclined to pay me, and I now understand the economic rationale for my relatively low pay back then: I wasn’t very productive.

Compared to Jonathon, or even to the photo clerks who had been there longer than me, it was obvious that I couldn’t do what they did in the same period of time. Jonathon mowed several lawns every week because he made it a point to develop relationships with customers that would last all summer, and touched base with them to make sure they were getting the service they wanted. More senior Walgreens clerks were better at juggling many tasks and completing all the little tasks that needed doing, often because they had both experience and initiative.

By and large, people earn in proportion to what they produce. The Post-Dispatch ran a very well-written op-ed today by 17-year-old Miles Larson, which seems to lack this insight (link via John Combest). Larson argues from an assumption that, given the opportunity, businesses will pay their employees as little as possible. This is true in a sense, but ignores the fact that businesses employ people at all because they produce something valuable. If the value of their production is much higher than the wage they are paid, it creates an incentive for competing businesses to offer to pay them more, and steal them away as an employee. Usually employers are smart enough not to let that happen — not least of which is because they don’t want to have to train a replacement. Most of the time, they just pay employees what they are worth.

There’s a reason that so many teenagers earn minimum wage: They are simply less productive than older, more experienced workers. As one study from the Show-Me Institute pointed out, most workers who earn minimum wage are young and still in school, while older workers — even poor ones — tend to earn well above minimum wage.

Younger workers earn less because they are less productive, not because employers are predatory. Minimum wage is not a refuge for the poor and underprivileged, it is a barrier preventing people whose labor is worth less than $7.25 per hour from selling their time to employers, leading to greater unemployment among the very demographic that minimum wage laws are ostensibly designed to protect.

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