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Wednesday, November 11, 2015

The Other Side of Minimum Wage

As we careen through the next election cycle, glancing off of every special interest group wrestling for dominance on social media, none has as widespread appeal as the question of increasing the minimum wage.  The issue attracts a lot of interest because it affects both sides of the commercial world. Theoretically, laborers want the minimum wage to increase, while employers generally don't want to be told how and what to pay their employees.

The entire issue is grossly misunderstood by the general public, who tend to confuse minimum wage with the living wage.  The minimum wage was designed strictly for entry level, unskilled jobs that used to be filled by young kids who were still living with their parents. The primary benefits of the minimum wage were twofold: the employee got to earn while he learned and the employer got a chance to test cheap labor for a possible future hire.  A living wage, on the other hand, is simply a government statistic, a calculation to give policy wonks and economists a benchmark against which they can ply their models.  Much like the poverty line, the living wage moves up and down, usually according to whichever political party happens to be at the controls.

Personally, I think the original purpose of the minimum wage is still the best one. But it only works when both employer and employee understand that it's a starting wage. The whole idea is that the better the employee does, the more productive he becomes. The more productive he becomes, the more profitable the business is, allowing the employer to reward the employee that much sooner with a higher wage.

Unfortunately, that's not how things have worked out. Because somewhere along the way, people decided to forego their apprenticeships and decided they were entitled to have the higher wages right off the bat. They wanted the higher wages sooner because they wanted the lifestyle afforded by higher wages sooner, too.  Cars, apartments, groceries, insurance, medicine -- it all costs money. It's stuff that can't be had on a minimum wage and anyone who expects otherwise is simply detached from reality.  However, sticking with the program actually works if your expectations are properly aligned.

Ah, I can hear the objections now. "You're so elitist! Check your white privilege!"

Sorry to disappoint you, but even if I were elitist, it wouldn't change the truth. Long before I ventured into elitism, I worked several minimum wage jobs until I found the one that clicked.  It worked. But it doesn't work that way anymore.  Not because the model is flawed, but because the people's expectations are.

Today, I was at a local Chipotle restaurant.  The staff was in a cheery mood and inadvertently turned up the music to a deafening level. I politely asked them to turn in down a bit. One of the girls touched the dial, but didn't lower the volume.  So I politely asked again. This time, there was a noticeable drop in the level, so I thanked her, but not before a rotund, beastly assistant manager began lecturing me about talking to the employees with respect, "or I'll have to ask you to leave." I was bewildered and responded there was no cause for her interference.  Needless to say, the situation escalated. I was not about to have my taco bowl experience ruined by some uniformed half-wit. At this point the dope, whipped out her cell phone to call someone. "Call a cop," I responded as I continued with my lunch.  When I was almost finished, she waddled over to me with a "to go" package and asked me to leave yet again. I told her I'd leave when I was good and ready. Then she launched into an automated response to anything else I might have said: "Thank you. Have a nice day sir." Over and over, whether I spoke or not, the refrain was the same.  "Thank you. Have a nice day sir."

This is an employee who probably cannot be fired. This is an employee who should never have been hired, but was given the benefit of the doubt and paid a minimum wage until she proved her worth and value to the company. But she's failing that test and actually costing the company money.  Someone like this should be paid a minimal wage until she either makes the grade or flunks out, keeping the employer's risk to a minimum. 

Now take that same circumstance and apply it to a local micro-business. The local mom and pop hardware store has a completely different structure than Home Depot. One wrong employee could drive away enough business to kill it. It has far less financial stamina and much higher risk of failure.  Should that little Main Street store -- even with as many as three or six locations -- be subject to the same arbitrary pay scales as a national brand? Especially in an environment that makes it practically impossible to fire an employee, even with good cause?

The American system of enterprise is not an entitlement program. The guy down the street will hire, but only what he can afford to hire. If you make it too expensive for him to hire, he simply won't hire. But if you allow him to invest his money -- and a minimum wage employee to invest his time -- the partnership can and does work out well for both.

Oh yeah, work. Now there's a concept. 

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