A Minimum Wage Increase: CEO’s Say – For the Kids’ Sake, Don’t Do It

My favorite factoid about the minimum wage, courtesy of MassBudget:

If the minimum wage had kept pace with CEO compensation since 1978,
it would now be $62.36 an hour.

On that basis alone, most of us would agree that an increase in the minimum wage would help to close the inequality gap and would therefore be a good idea. Most of us, but perhaps not those CEO’s, whose compensation keeps lapping ours. When the subject of a minimum wage increase was floated earlier this year, the CEO’s objected, on the somewhat curious ground that it would hurt teenagers. As the Herald reported on March 28: “Yesterday, business groups lashed out at the proposed legislation, saying it would take much-needed jobs away from teens.”

Certainly, the high unemployment rate among the nation’s youth is a significant problem (again, MassBudget has a helpful analysis). But opponents of the minimum wage say the minimum wage is the problem. One of those opponents, the National Center for Policy Analysis, points this accusing finger:

In July 2007, the unemployment rate for 16 to 19-year-old workers was 15.3 percent. Three years later, following a 41 percent increase in the federal minimum wage, the rate was 25.9 percent.

To their credit, the authors acknowledged that other factors (the Great Recession, for example?) may have played some role, but the minimum wage is clearly at the top of their “Most Wanted” list.

One reason for the ostensible concern of minimum wage opponents for the well-being of the nation’s youth has to do with their efforts to establish a lower minimum wage for teenagers. In some states (not Massachusetts) a federal law now provides for a $4.25 minimum wage for teenagers, but its present utility is compromised by burdensome restrictions, like the 90-day-per year limit and the provision that an employer may not displace a regular minimum wage worker with a teen minimum wage worker. (One wonders how much money Paul Ryan’s budget would devote to funding the enforcement of labor laws like these, but that’s a topic for another day.)

The minimum wage opponents are working hard to sell this idea to the parents of those unemployed teens. Why wouldn’t parents want their kids to start off in a job and then work hard, impress the boss and earn a raise based on their own talent and grit?

I can think of two reasons. One, it is the experience of many parents, especially these days, that working hard somehow fails to impress the boss sufficiently to earn a raise. Two, many of these parents know that most of the entry-level jobs are already filled, and that their parents have them.

Take a look at this chart from the National Employment Law Project. Among which age groups is the employment rate increasing — and by big margins? Among adults 65 and over, many of whom need to work to boost their Social Security.

I suspect that the parents of teenagers know that a job for a son or daughter might well come at the cost of a job for a father or a mother-in-law. (What’s your image of a Walmart greeter?) And a job at a lower minimum wage for a teenager would only reduce the income available to the extended family. The problem of youth unemployment would not be helped by a lower minimum wage. On the other hand, the problem of income inequality would be helped by a higher one.

One thought on “A Minimum Wage Increase: CEO’s Say – For the Kids’ Sake, Don’t Do It

  1. The purpose of raising the minimum wage is votes for politicians. We should start teaching economics in high schools so it’s harder for them to get away with this.

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