Friday, September 20, 2013

WAGE MARKET





The biggest problem in the job market is decreasing wages. The primary cause is the majority of job growth in our economy is in low skilled position such as fast food, retail, and restaurant services. Although these positions are ideal places to develop early work experience, these positions are not ideal careers, paying near minimum wage. In solving this issues, there are different approaches that could resolve this issue but many focus solely on increasing wages for unskilled labor rather than increasing availability of skilled positions. In fact, some push for increases of upwards of $15 an hour for unskilled labor. While this seems compassionate, the greater focus should be increasing skilled positions and improving the skill set of unskilled labor to elevate themselves out of such positions, improving both wages and youth unemployment. 

Most ardent opponents to increasing minimum wage oppose increase due to economic reasons. In industries with low profit margin but high availablity of low cost labor, wages will be low due to competition. Thus, legislatively increasing wages will lead to protectionary actions, such as labor reduction, to retain profitability. In the market of many of these goods and services, firms are not able to pass on increases to customers and still maintain revenues. Essentially, increasing minimum wage negatively impacts business, reduces employment, and also harms society. How

How does minimum wage increase harm society? By reducing opportunities for those who truly need unskilled positions. The desired target employee for these positions really should be youths, either high school age or early college. These unskilled positions are not ones that will give a person career skills but are ones that will help give them a basic work ethic that they will enhance later in their career. Minimum wage positions are not careers but simply first jobs. That is why they are so well designed for youths as high school students and young college students do not have a skill set yet. One of the main reasons why we have a high level of youth employment is because these positions are being held up by individuals who for whatever reasons have not vacated them to advance their own careers. There would be many social benefits if we as a society we looked at minimum wage jobs as what they are and focused on improving career mobility.

Think about the social effect of a raise in minimum wage. Essentially you are giving a raise to the least skilled workers in the system where they would normally have to move out of these positions and further their actual career path to achieve. Although they are low skilled workers, they could have taken the productivity level they obtain and moved into other positions to experience career and income mobility. Now you have removed the incentive to progress into a career path. The biggest effect again is the youth who rely on these positions for exposure to the work environment. There has been research done that links increase in youth unemployment with increase in youth crime, especially violent crime. Reducing youth unemployment is being looked at as a way of reducing crimes in places like Washington D.C. and many other urban areas. By consistently raising minimum wage, you provide the wrong incentive in the wage market and prolong the effects of youth unemployment.


Instead of trying to solve income inequality with legislating wages that essentially create unemployment, we need to look at career mobility. Subsidizing low income positions has proven to be the wrong policy. We need to focus on people moving out of these positions and leveraging the skills they have obtained into new and better opportunities. We need to improve our labor market but not with nonmarket related increases in wages. That just increase unemployment especially in a segment of our society that replaces that productivity with destructive behavior.