Last week during an interview, a banker stopped my admittedly long-winded explanation of discounted cash flow valuation and asked me point blank, “What’s your favorite Daily Tar Heel column you’ve written?”
When I took a second to think back through last semester’s pseudo-intellectual offerings, I quite quickly arrived at a conclusion: “The time I argued in favor of Voter ID.”
As it turns out, my lizard brain doesn’t get enough stimulation from centrist peace offerings to the DTH’s occasionally rabid readership. It likes to poke the bear. That’s why I’m here to tell you that a minimum wage increase is bad policy for Generation Y.
A minimum wage essentially says that an hour of work, no matter how unskilled or unimportant, is worth at least $7.25. That’s not a lot of money, but then again there are some jobs that require no real skill, effort or responsibility. Parking enforcement comes to mind, but I’m probably biased.
Raising the minimum wage implies that the inherent skills, efforts or responsibilities have increased in value. In all likelihood, though, the jerk writing me a $60 parking ticket hasn’t gotten significantly better at writing parking tickets.
But how could a minimum wage increase be bad for you? If the government decides that tomorrow scooping frozen yogurt is worth $10 per hour, it sounds like your lucky day. But while your wages went up, the shop’s labor costs went up by 33 percent overnight. Now that self-service yogurt station seems like a better investment than your continued employment.
Not every business will respond by dumping college students for robots that never ask for raises. Jobs like lifeguarding or waiting tables would require robots much too sophisticated for the average small business. On a bigger scale, though, higher labor costs lead businesses to automation and out-sourcing.
But say you support a minimum wage increase for altruistic reasons — it’s about fairness for the people who work two minimum wage jobs and still can’t afford housing or food, right? To this I respond with the immortal words of my friend who found himself wearing a purple Teletubbies costume while laying in the gravel driveway of a house whose owner claimed not to recognize him at 2:30 a.m. — “Life choices, man.” I’m kidding, that’s just plain mean.
But the probability of that sad story is exceedingly rare. According to the Heritage Foundation, only 3 percent of American workers earn the minimum wage. Slightly more than half of this 3 percent is between the ages of 16 and 24, and of that about 62 percent are enrolled in school. For those over 25 earning the minimum wage, the average household income is $42,500.
So who exactly benefits from a minimum wage increase? If you’re not sure or were confused by all the percentages, you see my point. The benefits will be so small and so poorly distributed that they won’t come close to covering the costs to businesses or youth employment.
