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Good Thoughts on the Bad Policy of Pricing People Out of Jobs

Craig Loehle sent me the following e-mail.  It’s posted in full below with his kind permission:

The insistent noise in favor of a higher minimum wage seems to be bolstered by the talk of a “living wage”, as in the minimum wage should enable a person to support a family of 4.  But this is insane.  This would entail a minimum wage of $25/hr or more.  I make the following points about this fallacy:

1) Many families rely on both husband and wife working, so the assumption of a single breadwinner is wrong.

2) The lowest unskilled jobs (bagging groceries, for example) can never support a “living wage”.

3) Someone who thinks they can stay at a job as cashier at McDonald’s for their lifetime and support a family that way does not understand the idea of a profession or career.  One needs to work up to higher levels with time, not stay a cashier.

4) there is a significant fraction of the workforce who needs minimal jobs (too old to work hard and so takes a job as greeter at Walmart, a wife who needs a part-time undemanding job, teenagers (as you often comment), the mentally slow, the lazy, the crazy, alcoholics, drifters, recent immigrants who don’t speak English, people in a financial emergency).  It is a terrible to disservice to price them out of the market.

5) If all jobs (bagging groceries for example) paid a “living wage” to support a family of say $50,000/yr, what would be the incentive to move up, to get educated, to be on time and work hard?  There would be none.  Europe has adopted this model, and you see people sweeping the streets for an elevated minimum wage.

Craig Loehle, Ph.D.